" ITREALMS: Microsoft vs Yahoo! The politics of search engine


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Wednesday, August 20, 2008

Microsoft vs Yahoo! The politics of search engine

The battle for Microsoft to buy Yahoo!’s search engine seems over, REMMY NWEKE reports that there is politics beneath.

Dead on arrival:

The much awaited Annual General Meeting (AGM) of acclaimed most trafficked Internet portal, Yahoo! Incorporated, has come and gone without any headway for the software giant, Microsoft Corporation to presently realize its dream of buying into Yahoo! search engine either as in whole or in part.

It all begun like rumour that Microsoft and Yahoo! would merge as at first quarter of 2007 and precisely in February, through a joint venture based on overture by Yahoo! according to Microsoft. Yahoo! promptly dismissed this claim in a press statement, saying it would consider Microsoft’s proposal, but described it as ‘unsolicited.’

But as the months go by the picture became clearer that Microsoft was actually making some advances to the owners of Yahoo! over its interest to buy over the search engine. This intensified to last for over six months yet un-ended, thereby dominating discussions among industry players ever since. Thus, affirming that there is an atom of truth in every of rumour.

By February this year, the chief executive officer at Microsoft, Mr. Steve Ballmer had raised the stake to $44.6 billion (about N5,226 trillion) to be divided into cash and shares for the offer.

Based on projections, Microsoft expects online advertising to double in the next three years, from about $40 billion in 2007 to $80 billion by 2010, therefore a merger or partial buy on Yahoo would ensure realization of these economies of scale.

True Prediction:
In December 2006, proprietors of ShoeMoney.com, predicted 10 reasons why Microsoft would seek to acquire Yahoo in 2007, to include that it is unheard of for the software giant to seat back while Google makes a display of how to take a search engine from level two to be reckon with as top 20 American companies.

Equally of note was futile shots at getting market share in the online advertising game by Microsoft which experts said would not be viable contest without acquiring Yahoo! and its number of Internet users.

In addition, analysts at ShoeMoney.com noted that the search algorithm owned by Microsoft – algo; is by far the single biggest challenge facing the company based on the fact that when there are no users using the search engine, as it were, tons of online adverts remain undisplayed on its platform. Stressing that if Microsoft were to acquire Yahoo!’s search algorithm it would be a giant step in getting users back into its fold.

Experts also said that Microsoft tried to broker an initial deal via a firm formally known as Overture for showing ads on msn.com search as most advertisers confirmed that Microsoft’s Adcenter has little volume from its search engine. Just as the Yahoo Publisher Network (YPN) is rated as the best contextual advertising network with great quality control team and real phone number (s) that real people answer.

Optimistic Microsoft:
The beat was up on Microsoft interest in Yahoo after the initial attempts failed for almost four months to make Yahoo to bow to its demands; from $20 billion (about N2,354 trillion) to $44.4 billion (about N5,226 trillion).

However, about a fortnight to the August 1 Yahoo! AGM, Microsoft in its desire began moves to re-open negotiations with the new board expected to emerge afterwards, with focused interest for partial instead of wholesome purchase of the search engine, according Chief Financial Officer (CFO), Microsoft, Mr. Chris Liddell, at the Financial Analyst Meeting 2008 held prior to the August AGM, just as inspired billionaire cum activist and Yahoo! shareholder, Mr. Carl Icahn was expected to uphold his threat to sack the current board of directors with Mr. Jerry Yang as the chief executive, over their refusal to yield to Microsoft deal worth $47.5 billion (about N5.59 trillion) at the last count.

“We took the view, and we still take the view, that Yahoo! is essentially a declining asset. … What changed was time, because ‘Time passed and value eroded’ and We don’t have a situation now where the initial offer that we made makes any sense any more from economics,” Liddell said.

Icahn as gladiator:
Investor Icahn known for raiding corporate entities withdrew opposition few days to the August 1 meeting and after promising Microsoft a successful bid. This action, observers said was blackmail on the incumbent board and management.

As indicated by his blog, IcahnReport.com, threat suspension was on realization that many shareholders do not really share his views, in spite of the campaigns. The fear was that Microsoft would eventually enslave most of the Internet or web users, especially advocates of the open source regime and to some extent diminish the high speed internet provider.

Part of Icahn’s blog revealed thus, “The proxy fight is over and it will not do shareholders or Yahoo any good to have the annual meeting turn into a media event for no purpose. Last week, (before AGM) I realized it was impossible to gain enough support from the large institutions to win a majority of the Yahoo directorships ....

“A few days ago, I met with both Jerry Yang and Roy Bostock and I believe both genuinely wish that we will be able to work together to enhance value. While we still disagree on many points, I have great hope ‘this will be the beginning of a beautiful friendship.”

Out come of the AGM:
The AGM ended with all incumbent nine-man board of directors led by Mr. Bostock, returned ‘unopposed’ except for Robert A. Kotick who soon after resigned but was replaced by Mr. Carl Icahn. Others are Ronald W. Burkle, Eric Hippeau, Vyomesh Joshi, Arthur H. Kern, Mary Agnes Wilderotter, Gary L. Wilson and Jerry Yang.

For Yang, the company is at a unique point in history with the eyes of the world focused on Yahoo! and tracking its performance. “The value inherent in Yahoo!’s unique collection of assets is truly extraordinary, and the progress we’ve made on our initiatives this year signals our ability to capitalize on the underlying potential of these assets.”

Though the board was expanded by additional three seats, reportedly created to please Icahn, there names would be announced on August 15, 2008.
African views and beyond:

Although some Internet enthusiasts like Ms. Nnenna Nwakanma, a software expert, believes that bulk of the Microsoft revenue does not come from developing countries, so Africa does not have much to loose if the bid was successful or not. But opposing school of thought noted that Africa is obviously important, stressing that Microsoft depends on investment in developing countries to make good revenue through the government and people by selling its applications, which have more or less left these countries with the notion that without Microsoft solution they may be going no where with computing.

It was further argued that the popularity of Microsoft Windows on most Personal Computers (PCs) originally ever before Open Source titles is another point that could not be dismissed easily.

Equally others opted that Microsoft target was Facebook, which is also making waves now and as they vowed to delete their account if Microsoft succeeds. “Microsoft can’t do anything anymore; or at least anything that doesn’t involve company buyouts?” For them, integrating the search team at Yahoo! with Facebook would avail any formidable army to take on Google.

Another Internet enthusiast, Dan Bull lamented: “Microsoft is really hell-bent on taking over the internet,” which summarizes the people’s fear in developing countries of the world and open source community.

Now that the politics of search engine is over, who knows the next step of acquisition to be made by Microsoft?

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