But beyond that, it’s anybody’s guess as to what will happen next:

Is it a case of "Keep your friends close, but your enemies closer" that will allow Yahoo to move Jerry Yang and Yahoo forward less distracted by Microsoft’s various advances and the joint Icahn-MSFT proxy threat?

Or is it just the overture to a renewed round of negotiations that could still lead to Microsoft buying Yahoo outright?

Given that last week’s developments had seemed to indicate Microsoft growing weary of Icahn as an intermediary, and that some observers had previously bet on a renewed MSFT offer before August 1 to bolster the chances of unseating Yahoo’s entire board in a proxy fight led by Icahn, the latter possibility appears increasingly dim.

But given the now nearly 6 months history of the Micro-hoo saga, who really knows at this point. What we do know however is that if negotiations continue at whatever level, it would continue to serve as a distraction for both Yahoo and Microsoft from what they should be concentrating on:

Innovation.

The three-way "negotiations" between Carl Icahn, the Yahoo board, and Microsoft turned up another non-starter offer for MSFT to cherry-pick Yahoo’s search assets, which in turn led to much finger-pointing, and general acrimony.

The result is that Icahn may now be out of the picture, and that Yahoo will survive through its August 1 shareholder meeting. Unless Microsoft comes back with a last minute complete buy-out offer at a guaranteed, cash-equivalent price that is ($29 per share would seem like the absolute minimum in this regard).

But it all seems increasingly unlikely, leaving Microsoft without a strategy, and Yahoo desperate to get past the distraction of the entire episode, and its operation back on track.

Jerry Yang is apparently begging his troops to keep working (for the second time in two months), and as I previously pointed out, for good reason. And even though we don’t hear similar exhortations form inside the Microsoft bunker, there is little doubt that Microsoft is not similarly affected:

During the entire first half of 2008, the only news out of Redmond other than the Micro-hoo botched deal attempts, has been the announcement of the "Live Search Cashback" (LSCB) attempt to sort of buy search query share using a rebate gimmick (that had failed to work before). That MSFT and some commentators touted this as a "game changer" proves the depth of their dilusion.

I have been working on a detailed post for why LSCB was such a bad idea in many (technical) ways, but the end-result is much easier to ascertain through some simple tests: I occasionally have been checking LSCB price quotes against Google search results for identical items, and the FREE(!) product listings at the top of Google Universal Search beat the LSCB prices with the "discount" (that MSFT is kind enough to hold in escrow for you for up to 2 months) MOST OF THE TIME!

I expect ComScores due out this week to tell the tale that Live Search Cashback has caused nary a blip on the search share radar screen. Even Microsoft seems to not be talking about it anymore…

During the same time frame, Google has had major announcements regarding their OpenSocial, GoogleGears, Google App Engine, and Google Android (Google’s mobile phone) software kits, all the while honing their core search and search ad serve in the background. Even Yahoo recently announced a relatively substantial opening up of their search toolkit to developers for third-party applications.

Back to Yahoo’s Serious Issues

(more…)]]> http://businessmindhacks.com/post/microhoo-post-mortem-post-part-4-the-patient-is-not-quite-dead-yet/feed http://businessmindhacks.com/post/microhoo-post-mortem-post-part-3-delusions-of-scale http://businessmindhacks.com/post/microhoo-post-mortem-post-part-3-delusions-of-scale#comments Tue, 08 Jul 2008 21:15:25 +0000 Alex http://businessmindhacks.com/post/microhoo-post-mortem-post-part-3-the-patient-is-not-quite-dead-yet-2 The ups and downs of the Micro-hoo saga continue unabated, with renewed Carl Icahn intrigue being the flavor of the week. The noose that irate shareholders have been verbally tying around Jerry Yang’s neck seems to be getting tighter all the time.

But this time even usually stalwart Micro-hoo cheerleader Michael Arrington of TechCrunch is saying that Microsoft may be going too far in its Machiavellian machinations to want to feast on Yahoo’s carcass.

Meanwhile David Kirkpatrick, senior editor of Fortune Magazine, argues that Microsoft will inevitably buy Yahoo, making the case that it has gotten personal for Redmond ever since Google wrested the crown of perceived "greatest and most powerful tech company" away from them.

But in arguing that Microsoft desperately needs Yahoo’s scale, Kirkpatrick falls into the same "scale will solve things" thought trap that is deluding Microsoft, and plenty of commentators throughout the blogosphere in both posts and comments as well.

Currently Google’s monetization advantage vs. Yahoo (confirmed, and likely similar vs. MSN/Live Search), that comes from their focused execution is somewhere around 50-100%. And it has NOTHING to do with "scale".

It has everything to do with the advertisers being able to afford higher average bids due to higher average conversions. Period.

Conversion is the only thing that ultimately matters to an advertiser. Scale is a straw-man. If YHOO or MSFT had equal or better conversion numbers for the same keywords, then advertisers would jump on that. The individual advertiser could care less about the total query share numbers, or total number of clicks, they only care about their ads converting when they are being shown and clicked on.

If you mail a direct response ad, do you care what total percentage of the region or nation that mailing list reaches? No way. You care about the conversion numbers, because if an ad doesn’t convert you can’t long afford to mail/run it. In search ads, if you fail to convert the clicks you get, as a small business you can be bankrupt before you know it. It’s that simple.

The total volume of searches or even clicks for a keyword on Google, Yahoo, or MSN/Live has little or nothing to do with it. It’s simply that at lower conversion rates on Yahoo or MSN/Live, advertisers have a harder time making the economics work for them.

Steve Ballmer should change his tune at the next Microsoft company meeting:

Conversion, conversion, conversion…

(more…)]]> http://businessmindhacks.com/post/microhoo-post-mortem-post-part-3-delusions-of-scale/feed http://businessmindhacks.com/post/microhoo-the-post-mortem-post-part-2 http://businessmindhacks.com/post/microhoo-the-post-mortem-post-part-2#comments Thu, 12 Jun 2008 22:35:21 +0000 Alex http://businessmindhacks.com/post/microhoo-the-post-mortem-post-part-2 OK, this isn’t the post I meant to write, but the (pseudo-)developments are simply happening too fast to catch one’s breath.

Today, Microsoft apparently walked away from a Yahoo deal more thoroughly than they previously had, which in itself makes little sense and proves how much Ballmer and Co. have kept themselves in suspended animation during this ongoing saga.

Now, as far as Yahoo was concerned, we knew that they wouldn’t get a lot done given the continued wheeling and dealing by billionaire investor Carl Icahn. Despite Jerry Yang’s pleading with the troops to keep their noses to the grindstone, there is simply no way that Yahoo has not been deeply affected:

I was at Sprint in a former life at the time when the proposed merger with WorldCom was going on, which ultimately, and it turns out mercifully, was blocked by the DOJ. And I can tell you from that experience that very little of substance beyond basic maintenance mode happened inside Sprint for well over 6 months.

All eyes, minds, and water-cooler conversations were cued on the proposed deal and its ramifications. And that was under relatively amicable circumstances mind you.

So, with the pronouncements by MSFT today, Yahoo’s stock taking a big hit, and Yahoo in turn announcing that a deal to outsource search ad serves to Google may be happening as soon as today, someone might be tempted to say: The nightmare is over.

Or Is It?

Despite all of the "titillation", the Icahn back-and-forths, the rumor, the innuendo, and the inflated/bruised egos, let’s take a step back and look at the fundamentals of this:

(more…)]]> http://businessmindhacks.com/post/microhoo-the-post-mortem-post-part-2/feed http://businessmindhacks.com/post/update-on-is-a-microsoft-facebook-play-in-the-cards http://businessmindhacks.com/post/update-on-is-a-microsoft-facebook-play-in-the-cards#comments Thu, 29 May 2008 02:01:25 +0000 Alex http://businessmindhacks.com/post/update-on-is-a-microsoft-facebook-play-in-the-cards There have been surprisingly fast developments in the brewing war over social networking open standards involving Facebook and Google’s FriendConnect and OpenSocial, which I first referenced in last week’s post on Microsoft’s possible rationales for soon making an offer for Facebook.

Facebook on Tuesday announced "fbOpen" as its competing OPEN standard for building Facebook compliant social networks. I would expect that a competitor to Google’s FriendConnect for accessing Facebook’s (and other compliant social networks’) social graph information, if not already included, is soon to follow.

How nice of them to be complying with my recent prediction so quickly… as for the other shoe to drop and Microsoft buying them, we’ll see.

Here’s what I said May 16 on Microsoft’s options:

… Buy Facebook and VERY QUICKLY throw weight behind Facebook’s API as a competing standard to OpenSocial in opening up the “walled garden” of Facebook in strategic ways.

Given Facebook’s recent loss of developer energy and possible setting in of some user boredom, in reality this move is not much of a surprise per se, but the speed of the reaction is. This goes to show that mind-set and mind-share are everything in this new Attention Economy of Web 2.0 and beyond.

Facebook just couldn’t afford to let Google own the "open social network API" category and run away with things. So they had to reverse course and open up their social graph. We’ll soon know if Microsoft thinks it can afford being without a credible stake in the social networking space as a whole. (And no, their "Live Spaces" offering is NOT a credible stake.)

My bet is on them buying Facebook, and quickly.

I was reminded today that Rupert Murdoch did the MySpace deal in one weekend back in 2005. And despite the recent MySpace plateauing (at least in the U.S.) until about the beginning of this year when they made their moves on MySpace apps and a more solid API footing supporting Google’s OpenSocial, the then $580M price tag must appear like the steal of the century now that Facebook might go for $15B+.

Given that Micro-hoo negotiations appear to have more thoroughly collapsed for the time being (both sides have made statements in the last week or so that things were never as close to a deal as assumed before Ballmer’s pull-out, with both Bill Gates and key Yahoos presumably holding serious reservations), Microsoft does have a lot of cash burning a hole in it’s pocket.

More on that continuing saga later. I still owe you "Micro-hoo: The Post-Mortem Post Part II", only the developments are moving faster than I can write… intelligently…

Today, some not so minor controversy erupted in the blogosphere in reaction to the news that Facebook had just shut down Google’s FriendConnect on its platform. There were a lot of details being discussed re: data privacy vs. data portability between still largely "walled garden" social networks, all of which are quite relevant to a larger discussion on the future of the Web.

And Robert Scoble of Fast Company and Mike Arrington of TechCrunch got into a bit of shouting match on Twitter, a "GillmorGang" teleconference call, and their respective blogs.

I am not going to get into the finer points of the data issues here (but you should by all means read the above posts and commentary if you are into this sort of thing). But once again it appears that some larger strategic issues are being lost in the shuffle.

Check out what I wrote in a comment on a Silicon Valley Insider Micro-hoo post about a week or so ago:

While nothing is certain, this [Microsoft-Facebook deal idea would be] already a much better idea than the Yahoo deal. Given what’s going on right now with MySpace adopting Google’s OpenSocial, and making deals with Twitter, Yahoo, et al. to use MySpace data/resources in their systems, MSFT could actually try to preempt Google from running away with social networking:

Buy Facebook and VERY QUICKLY throw weight behind Facebook’s API as a competing standard to OpenSocial in opening up the "walled garden" of Facebook in strategic ways. Facebook apps are starting to lose developers from what I hear, many of which may be moving to OpenSocial API app development. Such a move could stop the slow-down/bleeding, if developers had a sense that big MSFT dollars were now gearing to put the pedal to the metal…

The longer term question is not IF social data will become complete openly exchangeable on the Web, but when. There is no need to have the same things stored/replicated in 1/2 dozen or more places/systems.

Alternatively, MSFT/Facebook could just adopt OpenSocial, and then look to gain more influence on the standard, trying to out-flank/out-innovate MySpace/Google. No good if MSFT let’s Google run away with it in yet another area.

(I took the liberty of adding a few links and minor grammar improvements into the quote.)

And this, in a nutshell, has been exactly the underlying dynamic of what has been playing itself out since yesterday. Leave out MSFT for a moment (though they are certainly lurking in the background), and the Facebook vs. Google/OpenSocial/MySpace battle lines were clearly being drawn…

(more…)]]> http://businessmindhacks.com/post/post-microhoo-a-microsoft-facebook-play/feed http://businessmindhacks.com/post/microhoo-the-post-mortem-post-part-1 http://businessmindhacks.com/post/microhoo-the-post-mortem-post-part-1#comments Wed, 14 May 2008 18:20:15 +0000 Alex http://businessmindhacks.com/post/microhoo-the-post-mortem-post-part-1 It’s been 10 days since Microsoft-Yahoo deal was called off by Steve Ballmer, and in the days that followed the commentary and speculation has been churning at record pace.

Several times last week I was tempted to write this post, only to hold off for a while longer because I wanted to write something for my readers that would go well beyond a news rehash.

As I said in previous posts, it is easy to lose sight of the essentials in the dizzying onslaught of "Steve said, Jerry said…" titillation, investor and market timer stock price considerations, and "what’s the next step" agonizing. Instead let’s go back to Business Mind Hacks basics:

I have argued that the deal was never a good idea in the first place, and that this should have been the first and foremost question on anyone’s mind. Even now, there appear to be major Yahoo stockholders such as Carl Icahn, who are attempting to employ corporate board machinations to force the deal after all.

And of course there has been plenty of speculation that Microsoft would come back with the same or lower offer after having Yahoo’s stock price pummeled for a little while (incidentally, it didn’t go down quite as much as some had predicted, possibly a sign that the market viewed the deal was as in fact much less of a clear winner).

None of it would really matter as far as the fundamentals of the deal: That Google is the uncontested market leader in search and paid search ads, that neither Yahoo nor Microsoft have been able to compete effectively, and that they are falling further behind every day. (Notice recent earnings data showing Google’s search revenue is on track to surpass Microsoft’s flagging Windows/Vista revenues some time in 2009!)

There are several reasons for this, some technical, and some Branding/Positioning related and hence much more basic than the complex issues relating to e.g. paid search optimized monetization. I will further discuss the latter in another post. Let’s go with the branding issues for today.

(more…)]]> http://businessmindhacks.com/post/microhoo-the-post-mortem-post-part-1/feed http://businessmindhacks.com/post/micro-hoo-techcrunch-interview-with-citi-analyst-more-proof-its-a-bad-idea http://businessmindhacks.com/post/micro-hoo-techcrunch-interview-with-citi-analyst-more-proof-its-a-bad-idea#comments Thu, 01 May 2008 21:15:36 +0000 Alex http://businessmindhacks.com/post/micro-hoo-techcrunch-interview-with-citi-analyst-more-proof-its-a-bad-idea I am not usually in the habit of creating posts with large scale quotations, but in this case, the information that was revealed, but buried in a longish interview (too long for most people’s itchy, "RSS Feed" attention spans :) is so important, and so validates what I’ve been saying for several weeks now, that I am going to break my own rule.

This is from an interview by TechCrunch’s Michael Arrington with Citi Bank analyst Mark Mahaney in regard to the proposed Microsoft-Yahoo deal:

MA: […] I heard that they commissioned an outside study sometime last year [that] suggested that they would have 85% plus increases in cash flow from outsourcing search to Google. […] I think you said that they would go from 4 cents to potentially up to 9 cents per search — is that right? Sort of, 40-90 dollar RPMs on searches?

[…]

MM: […] they actually said that they thought they — they didn’t name Google but it was obviously Google — that the difference in the monetization gap was 60 to 70%. That’s the first time we’d heard or seen Yahoo sign off on this specific gap.

No wonder that Yahoo has been flirting with outsourcing at least some of their paid search ads to Google: It’s instant money in the bank, to the tune of potentially 25-50% higher TOTAL cash flow! (TechCrunch rightly pointed this last one out, but omitted the underlying cause in their write-up.)

I came to a similar conclusion re:"the monetization gap" a week or so ago, just by looking at the respective search shares reported by ComScore, as well as the Q1 earnings numbers by Google and Yahoo.

Obviously, the numbers reported by Mahaney from an in depth study (that was apparently commissioned by Yahoo itself!) are much more authoritative. And to me, they therefore are the true bombshell out of this interview, though Google Q1 earnings were obviously enough of a bombshell to send their stock up over $100 in a few days.

Now beyond this very key admission, the further question obviously is how this portends for the proposed buyout of Yahoo by Microsoft. And here again Mahaney is pulling no punches,  and comes to a conclusion very similar to what I wrote here. Even though the TechCrunch summary of the interview again inexplicably omits his dire predictions.

(more…)]]> http://businessmindhacks.com/post/micro-hoo-techcrunch-interview-with-citi-analyst-more-proof-its-a-bad-idea/feed http://businessmindhacks.com/post/micro-hoo-a-bad-idea-branding-and-positioning-issues http://businessmindhacks.com/post/micro-hoo-a-bad-idea-branding-and-positioning-issues#comments Tue, 29 Apr 2008 23:11:03 +0000 Alex http://businessmindhacks.com/post/micro-hoo-a-bad-idea-branding-and-positioning-issues Some comments I wrote today on this Silicon Alley Insider post on new movements in the Microsoft-Yahoo negotiations ballooned to the point that I determined they would be worth their own expanded post for the benefit of my readers.

More so because they were veering head-long into serious "Business Mind Hacks" psychology issues related to Branding and Positioning.

In response to Henry Blodget’s focusing on the admittedly titillating details of the current negotiations, while mentioning only in passing the likely pernicious effects of the deal in its currently proposed form on both Yahoo and MSFT, I said this:

Why would Henry say "but that’s a different story"?

That is THE story… forget about the short-term, short-sighted, Wall Street angle… none of it will matter if Q1/2009 shows that Micro-hoo has fallen even further behind Google in search/paid search due to all of the distractions that are sure to ensue if this goes through.

(more…)]]> http://businessmindhacks.com/post/micro-hoo-a-bad-idea-branding-and-positioning-issues/feed http://businessmindhacks.com/post/why-recent-google-q1-earnings-should-have-your-ears-prick-up http://businessmindhacks.com/post/why-recent-google-q1-earnings-should-have-your-ears-prick-up#comments Tue, 22 Apr 2008 20:55:08 +0000 Alex http://businessmindhacks.com/post/why-recent-google-q1-earnings-should-have-your-ears-prick-up With wild stock market swings becoming a fixture in recent weeks, the one that was brought on end of last week by Google’s unexpectedly strong Q1 earnings report - sending it’s stock up from $455 by almost $100 since Friday, is clearly worth a detailed look to all with an interest in seach marketing.

As CNET blogs, Google earnings may make Microsoft yearn more for Yahoo, but the real meat here is in the post’s Google quarterly earnings chart since Q1/2005. It shows that Google was making about as much all the way back then as Yahoo is expected to earn this quarter ($1.28-1.35 Billion).

Only Google has been killing it in these last three years, and just last week announced earnings of $5.2B.

You do the math, that’s about 4 TIMES as much as Yahoo.

But what is much worse, if the ComScore search engine stats have any semblance to reality at all, Google in e.g. December of 2007 had about 5.6 billion searches (a 30% year-over-year gain) to Yahoo’s 2.2 billion, or only 2.5 times as many. That means they are monetizing searches much more efficiently.

And this is the big damn secret that often gets overlooked by the mainstream media, including the financial analysts, because they do not understand paid search and it’s offspring very well:

(more…)]]> http://businessmindhacks.com/post/why-recent-google-q1-earnings-should-have-your-ears-prick-up/feed http://businessmindhacks.com/post/microhoo-the-plot-thickens http://businessmindhacks.com/post/microhoo-the-plot-thickens#comments Thu, 17 Apr 2008 18:48:10 +0000 Alex http://businessmindhacks.com/post/microhoo-the-plot-thickens … and that is an understatement. A recent series of actions by Yahoo are all designed to either force Microsoft to up their current unsolicited bid or make the entire plan unpalatable, ending with Microsoft walking away.

For a summary of all the latest twists and turns, read Henry Blodget over at the Silicon Alley Insider.

Apart from engaging in talks with Time Warner and other potential, yet much less realistic "white knight" buyers, Yahoo has been running tests with Google on farming out ad placements through their arch-rival. Shrewd analysis via CNET on this is well worth reading:

What Yahoo’s Google gambit says about the failure of ‘Panama’.

The numbers don’t lie, and these actions speak much louder than any words could: Yahoo cannot compete in paid search ads (Google Adwords) or paid content ads (Google Adsense). 

And neither can Microsoft.

Both are failing to make any serious inroads into Google’s dominant leadership positions in search and ad services. If they had read their Ries & Trout ("11 Immutable Laws of Marketing", etc.), they could have known BEFOREHAND that this was never likely to really work for them.

The way to beat the market incumbent is never to try and go up against them on their turf, it’s to create a whole new market that will eventually obviate or at least cause serious attrition in the incumbent’s market.

Guy Kawasaki calls this "jumping to the next curve", making your offering not 10% better, but 10 TIMES better. Creating a whole new market that wasn’t there before through innovation.

(more…)]]> http://businessmindhacks.com/post/microhoo-the-plot-thickens/feed http://businessmindhacks.com/post/back-in-black-and-white http://businessmindhacks.com/post/back-in-black-and-white#comments Wed, 02 Apr 2008 07:36:16 +0000 Alex http://businessmindhacks.com/post/back-in-black-and-white I’ve been on an extended hiatus from this blog, here’s why:

I went "back to the lab" of my 1-on-1 coaching business and worked feverishly on refining my "Business Mind Hacks" methods for you, a wider audience. No stone was left unturned, no whiteboard space left unscribbled, no expense of time, money, and energy spared.

There were sleepless nights. There was the occasional throwing up of arms in disbelief.

It’s not that the things I was teaching last year were not excellent, because they were, it’s not that they were not totally relevant, because some of the biggest internet marketing gurus are secretly using many of the same principles to their advantage, albeit often overlooking some of the deeper aspects. It’s just that I needed to develop many more directly actionable derivatives from these materials to serve you best.

After running several Webinar training series last year, I took the feedback from my "trail blazer" groups, added in the experiences from extensive work with my private 1-on-1 clients, and the results are about to become public very soon.

All the while, even though I felt I didn’t quite have the time to devote to blogging at the level of quality that I would expect from myself, I did create a large number of skeleton post outlines, and you’ll get to read the fleshed out and polished versions of these ASAP.

In the meantime, you may have noticed that the blog has had a total face lift, and many, many additional hours of tireless work have gone into getting just about everything the way I wanted it. Having researched many of the ins-and-outs of blogging in general, and the Wordpress platform in particular, there is a good number of very subtle design, SEO, and usability principles that have gone into this.

Not to mention the priceless advice of some of the true luminaries of blogging and social media, such as Andy Beard (his blog is a veritable goldmine of stuff that goes way beyond the ordinary… really… how does he come up with these things… almost daily… ?).

So it turns out, I create Mind Hacks, and Wordpress hacks as well… I’ll be sharing those as a separate train of thought from my usual topics, in order to give back to the Wordpress and blogging community.

Anyway, I’m back. Let’s get this party started.

Here’s to a fantastic Q2!