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:

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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.

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Why recent Google Q1 Earnings should have your ears prick up

Google MoneyWith 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:

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