Battle of The Titans

On Wednesday, Yahoo announced that it was going to test-run Google ads on Yahoo Search for 3% of our traffic. The implications of this is huge. First, it says very loudly that we have other options. Secondly, it shows that Yahoo can make more money because Google ads tend to generate more money, and we can instantly boost our profits by going with Google and getting rid of our ads division. It'd be a drastic change, but it's definitely possible. Microsoft fired off a letter immediately sent a letter saying a Google-Yahoo alliance would give Google 90% share of the text advertising market, and that would make Google a monopoly. This is deliciously ironic since Microsoft is a monopoly.

Later that night, even more news hit the newspapers. There were rumours that Yahoo would merge with AOL, and Time Warner would invest $10 billion into this new company, and hold a 20% stake in the company. This would essentially create a Yahoo-AOL-Google alliance (since Google owns 5% of AOL, and we might be running their ads).

Just when you thought the story had climaxed, another twist came. Microsoft is apparently trying to team up with NewsCorp to buy Yahoo and form a Microsoft-MySpace-Yahoo entity.

In my opinion, that makes Rudolph Murdoch of NewsCorp kind of an evil guy. When Microsoft first announced that they intended to buy Yahoo, Rudolph Murdoch offered to come to our aid. He was trying to get us to buy MySpace for $10-$15 billion, and create a merged entity. Yahoo however scoffed at that price saying it was too high (which it is considering that MySpace's growth has peaked). So, Murdoch now he has joined forces with Microsoft to try to get what he wants.

The other interesting actor in all of this is Google. They want to preserve the status quo, ie Yahoo not merging with anyone. The idea is to have just enough competition so no one complains that Google is a monopoly. A merged Yahoo-Microsoft might be a viable competitor to them. Google's founders have called Jerry Yang of Yahoo already saying that they can help our efforts against Microsoft.

All eyes are now on April 23, when Yahoo reports its Q1 results. If Yahoo did poorly, the stock price drops, and it makes Microsoft's $31/share offer even more tempting. Furthermore, if Microsoft then pulls its bid, Yahoo's stock price drops even more, which makes it even easier for someone to buyout Yahoo. The odds are somewhat against Yahoo since Q1 is traditionally a slow time of the year for advertising (notice Google's share moving from $700 down to $470). In addition, there's a looming recession. If Yahoo has a good Q1, or even blows away the expectations, then the stock price goes higher, and it validates what Jerry Yang has been saying all this time, that Microsoft has dramatically undervalued us.

I definitely can't complain that my work is not interesting. Every release we're doing is an effort to show the world what Yahoo is capable of, and what the true value of Yahoo is. It has personally motivated me to fight for the freedom we currently enjoy as an independent company. I look around, and cherish every moment that we have now, as things can dramatically change very quickly.

The only certainty is uncertainty. And so, the Battle of the Titans continue. Tune in for the dramatic finale when all will be revealed.

I'll end with this parody of 300 that's circulating on the Internet about Yahoo/Microsoft.


You heard the nice lady. Go to search.yahoo.com and click our ads