The Sunday Times of UK reports (more like speculates) that Microsoft is going to buy Yahoo’s search business for $20 billion in a very complex transaction. The Sunday Times claims that Jonathan Miller, formerly chief executive of AOL, and Ross Levinsohn, a former president of Fox […]

yahoostockThe Sunday Times of UK reports (more like speculates) that Microsoft is going to buy Yahoo’s search business for $20 billion in a very complex transaction. The Sunday Times claims that Jonathan Miller, formerly chief executive of AOL, and Ross Levinsohn, a former president of Fox Interactive Media, are going to run the new management team.

Under the terms of the proposed transaction, Microsoft would provide a $5 billion facility to the Miller and Levinsohn management team. The duo would raise an additional $5 billion from external investors. This cash would be used to buy convertible preference shares and warrants which would give it a holding in excess of 30% of Yahoo. The external investors would also have the right to appoint three of Yahoo’s 11 board directors. The talks with Yahoo involve Microsoft obtaining a 10-year operating agreement to manage the search business. It would also receive a two-year call option to buy the search business for $20 billion. That would leave Yahoo to run its own e-mail, messaging, and content services. It is expected that the operating agreement would boost Yahoo’s income by as much as $2 billion per annum. (my emphasis added)

If true, that would value the search business — not exactly a champion — more than Yahoo’s actual market value of approximately $16 billion. Microsoft might be desperate to win online, but as we have seen time and again, trying to buy share in search is a failing strategy. With little or no sources, I find this story as unreliable as a piece of swiss cheese left for too long in the pantry. Levinsohn who described the Times story as “total fiction” seems to agree. What are your thoughts?

  1. The BBC posted the story regarding reCAPTCHA digitizing books October 2007, the Times UK posted the same story August 2008, almost a year later.

    Maybe John Waples should of talked to Mike Harvey before posting the story.

    Just a few weeks ago Ballmer stated that, “acquisition is a thing of the past”, that sounds pretty final, doesn’t it?

  2. [...] out the other coverage from Techcrunch, Gigaom, AlleyInsider, Inquistr, Venturebeat, AllthingsD, Paidcontent, and [...]

  3. I just searched for a Product, including Product ID on Amazon, no results. Searched on Google with the same Product ID. First thing that comes up is an AD from Amazon for the Product with a link to it’s page on Amazon, all other high ranked links are basically link spam.

    Today’s product search is pathetic.

    What Microsoft needs to do, is change the search experience by forcing Google to start competing on equal terms again (or not so equal). Not try to buy another company which just another search tool, but leaving the rules of the game the same.

  4. @Ronald

    spot on… i think the only way to beat Google – outwit them by offering better search experience. I think as long as people are unable to do that, Google will keep getting bigger and bigger.

  5. @OM
    I think it all boils down to ROI,if you develop such technology. It will not only be good for search, a few 3 letter agencies come to mind which will take the math and run with it.
    Meaning you don’t have to build a scalable system which might have, or not, Microsoft as an exit strategy.
    Microsoft by itself seems to be incapable of developing it , even they are easy accessible (Steve B) and don’t have a big NIH. They have a _lot_ of lawyers. And without Microsoft good luck out racing Google.
    So it comes down to spending a lot of Money and deal with Microsoft Lawyers or just do the research and deal with some other Lawyers.
    Take your poison.

  6. @Ronald

    So you are essentially saying – build kick ass technology. maybe sell it to some agencies. but ultimately sellout to microsoft and hope that they can throw enough resources at it and make google sweat bullets.

  7. @OM
    No. If you sell it to agencies it’s gone. Classified and gone. For the few people who can actually do this kind of stuff it’s a trade of, like ROI is.
    The bottom line is basically the same for the amount of work and risk you put into it.
    Think about it this way, if you really want to put data into context. You need to do some form of decomposition, which requires rudimentary understanding of concepts. Which requires autonomous building of abstract concepts and on it goes …
    What else can you do with a system like that, even if it’s just described in math. and verified by Neurologists to make sure mother nature does basically the same.
    Would you waste it on search?
    Oh btw consciousness is not a state it’s a scale, so you have to deal with that too. Just to clarify, since most people (Psychologist/Neurologist) think boom there it is, not so in math.

  8. I think the piece that people are missing is that in order for you to effectively monetize search, you need a large breadth of advertisers buying a huge breadth of keywords. No technology is going to give MSFT this market share in the short term as most digital marketers will only put large pieces of thier budgets behind platforms that get a large percentage of the query volume. That is why Yahoo! is so attractive to MSFT. They get a decent chunk of the overall search market and will allow their technologies (which they probably see as superior to YHOO) to create a much more efficient marketplace.

  9. @feeldumb
    I disagree. Companies want something that works. Why did they go from TV or Banner ads to Google, because Google works measurable better.
    Now why does Google work?
    Try to teach a system the meaning of mean.
    First thing, there is a difference between being mean and by x I mean y.
    Then there is a difference in situation of how mean being mean is, which can differ widely between people and situation. And X might not mean the same to me or you, so Y can differ.
    It all boils down to context not equal context from person to person and for that persons situation.
    Which leads to, as better I can predict a context as better I can predict behavior, hence keyword search works better then Banner or TV ads. It has a limited scope, better context, better click through.
    Can we do better then that, sure. But that is not where the money goes, scalability (data centers) is where it goes. You have to compete on speed too, not only accuracy. Or the impatient brain goes for good enough, if it has to wait to long for really good, all depends on situation again. But I would not bet against fast good enough.
    I assume Yahoo is mostly about banner ads, you need a lot of eyeballs to get to the same click through rate of good keyword search (see above). Therefore without a better understanding on how things work an investment in Yahoo is wasted money, they need to make those banner ads click through rates much better.


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