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Yahoo's Judgment Day

ryan-kevin
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The eyes of the world are upon us. On August 1, Yahoo shareholders will decide the fate of existing management, and thereby the short-term destiny of search and search advertising. Also standing tall before the man is the concept of competitive interests fueling the future of information discovery.

Yahoo has been hit pretty hard by shareholders, investors, advertisers and yours truly for apparently signing its own death warrant with alleged bad decisions like walking away from Microsoft, poisoning the P&L, and partnering with Google.

Yesterday, Yahoo made a major move forward by shedding some light on recent decisions, plans for growth, and a whole lot more.

Knowledge is Power

Spin is still more powerful than knowledge. Like many kids in my generation, I learned a lot from "Schoolhouse Rock." I also learned a lot from spin doctors in the form of commercial advertisements between lessons. Many have asked how Yahoo could walk away from such a sweetheart deal with Microsoft, fueled by a solid concentration of spin and baseline knowledge-gathering.

Microsoft was set to save Yahoo from certain death with a solid offer to purchase assets, or so we thought. According to yesterday's shareholder presentation, the deal wasn't such a great idea as Yahoo provided a detailed timeline of the events as they transpired.

Here's the short version: once the Yahoocrosoft proposal became a piecemeal offering, it didn't make sense anymore. Yahoo would have had to disassemble its search assets completely, hand it over to Microsoft and hope Microsoft's platform would stay competitive.

Kindergarten Economics

The key information provided is Yahoo's proposed dependence upon Microsoft. Search advertising multiplicity effectiveness arguments aside, chopping up Yahoo and selling it piece by piece is exactly what the management team is trying to avoid.

If Yahoo wanted an asset fire sale, Carl Icahn could do it better than anyone else.

Was Yahoocrosoft a good idea in the first place? Perhaps, but if the details provided by Yahoo are any indication of how the conversations went, it's no surprise there was no marriage...er, merger.

Yahoo's timeline within the shareholder presentation really moved me. The unsolicited bid was announced in January, and by April Microsoft was bullying its way into a resolution. Four days after big blue threatened a proxy fight, Google tests began. Four days after Microsoft said no to a complete purchase, Yahoo announced its deal with Google.

While the public antics were certainly popular, there should be no doubt as to how the deal went down, from Yahoo's perspective.

Twitter Me This, Batman

Like a Twitter discussion gone awry, many of the details involved in and surrounding discussions between Microsoft and Yahoo were left out of the timeline and charts. Then again, people don't really talk on Twitter, they announce and wait for responses. When it works, it's great. But more often than not, it doesn't, and users are left to try and sort out body parts in a mangled mass. Sound familiar?

I was particularly interested in pulling together fragments of the details surrounding the ad serving agreement with Google. Specifically, how tests conducted within the search equivalent of remnant inventory on content pages could be in any way relevant to directive search ads like the examples shown in Yahoo's presentation.

Directive search advertising and content or contextual search advertising couldn't be more different in terms of response, desired action, and user mindset.

I'd also question Yahoo's comparison of Microsoft's "hybrid" offer on two points. Controlling user experience and query volume, along with full flexibility to maintain independence, are highly subjective. Touting them as benefits (with Google sitting in the living room) seems a bit of stretch to me.

That was Then... This is Now

The question isn't whether Yahoo management is inadequate. The question is who can do it better? Google started out as a sandbox for creative people and built a billion-dollar global brand using those principles. Yahoo has been maximizing cash assets in a creative culture and competitive landscape.

Yesterday's shareholder presentation provides more details as to how the Google relationship could be managed (with an emphasis on could). Logical side-by-side comparison presentation slides indicate that Google was the best choice for an alignment over Microsoft. Well... which slides did you think would end up in the presentation?

The jury is still out on the merits of the Google-Yahoo partnership. This is the first time since the Yahoocrosoft insanity began that I've seen strategic thought and tactical execution plans made public that make sense for Yahoo's future.

As stated previously, the end game has more to do with integrating digital assets than search tunnel vision, and Yahoo seems more dialed in than ever on the integration front.


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