Knowledge is the Foundation To Success  

Since thwarting recent Microsoft buyout and partnership efforts, Yahoo!’s stock price has sunk back to levels not seen since prior to the proposed alliance, a full 50% off of where it had reached during the height of buyout speculation. Yikes. Looks like Yahoo! shareholders were the big losers there.

Perhaps it’s time for both sides to calm down, digest the situation and reconsider working together. After all, it sure looks like Yahoo! needs Microsoft’s help just as badly as Microsoft needs Yahoo!.

Let’s take a look at some recent search query data provided by Compete.com and see who really needs who here. When comparing June, 2008 search traffic numbers to those from June, 2007, there was a 12% decline in actual search queries performed at Yahoo! while Google realized a 44% surge in traffic; That is pretty staggering. Microsoft’s search queries increased, but very little. Based on the 9.1 billion searches performed in June, Google currently dominates search market share receiving 69% of all search queries, followed by Yahoo! with 19% and Microsoft with 8%.

Yahoo!’s one time search query empire has been gradually deteriorating as Google takes over the market. Yahoo! is dominant in other areas, but could certainly use strategic and financial support from Microsoft. Microsoft could be a great ally in trying to prevent Google from further expanding their reach into all areas of technology. I do not necessarily think a buyout is the best solution, though it might be, but I sure think a partnership like the one that had been previously discussed might be wise.

Microsoft needs to increase its Internet presence in order to survive in the future and Yahoo! offers a unique opportunity. Google is already encroaching on Microsoft’s core software business via their free online applications. Microsoft is well aware of Google’s threat in various areas and must do something soon. With Yahoo!’s stock price back to pre-discussion levels and the influence of Carl Icahn who now sits on Yahoo!’s Board of Directors, renewed talks would certainly not surprise me.

Google has already prepared an argument regarding the possibility of Yahoo! and Microsoft partnering, which is a bit ironic since Google has gone on to partner with Yahoo! themselves. We’ll still have to see if the Department of Justice decides to let that deal go through. Until then, I suggest that the powers that be at Microsoft and Yahoo! regroup and reconsider. Hey guys, you both need to do something. The Google Empire has arrived. Clearly, resisting independently has not been working. Perhaps it’s time to try something new.

Cuil Has Arrived:

A former Google employee who is backed by Venture Capital funding and a staff of 30 officially launched a new search engine last Monday. The newcomer’s name is Cuil, pronounced “cool,” after the Gaelic word for “wisdom.” Cuil’s index spans 120 billion Web pages, which they claim represents “more pages on the Web than anyone else — three times as many as Google and ten times as many as Microsoft.” They believe they have developed a more comprehensive and efficient way to scour the Internet. Some went as far as to call it the “Google-buster” search engine. Though Google may not officially “index” as many pages, they do claim that their system reviews over 1 trillion unique URLs.

I checked it out and was not overly impressed. I do not think Google has anything to worry about here, but I guess you never know. Check it out and see for yourself.

Cuil does not currently run any ads. I wonder how they ever intend to make any money? Regardless, if they somehow do ever become a large player, that would actually impact the PPC advertising landscape.

Microsoft Exec Leaves After Yahoo! Debacle:

A little more than a week ago, Kevin Johnson left Microsoft to become the CEO of Juniper Networks. Johnson was the driving force behind Microsoft’s unsuccessful bid for Yahoo! and was head of the Platform & Services Division, the largest group at Microsoft, containing Windows, Live and several other components. He has been trying to beef up the software giant’s Internet presence and targeted Yahoo! as a way to possibly compete with Google. I could see where he might be feeling a bit uncomfortable at Microsoft after the failed buyout effort, which required a great deal of time, effort and money.

Newspaper Industry’s Online Advertising Efforts:

NYTimes.com recently launched a self-service display-advertising platform, enabling small businesses to reach the New York Time’s affluent online user base. They offer user-friendly features and some nice options. This program could likely have positive results for the right advertisers, but the question becomes, how many different accounts is it efficient to setup and manage? Is it worth it to run a campaign at NYTimes.com when hundreds of newspapers’ websites can already be accessed via Quigo.com? And on that note, should any money be spent on these display ads rather than PPC advertising? Is there enough traffic to justify the effort? The only way to find out is to test. This is still a relatively new area of online advertising.

This morning’s news forced me to table my prepared blog in order to mention the latest twist in the Yahoo! saga. As suggested in an earlier blog, a Microsoft – Yahoo! arrangement is potentially back on the table. Earlier today, Microsoft said it would be willing to reopen talks to buy all or part of Yahoo!, but only if the current Yahoo! Board of Directors is replaced at the upcoming Yahoo! shareholder meeting on August 1st.

Per a Microsoft statement, “In the past week we have had the opportunity to discuss with Carl Icahn the prospects for a possible agreement between Microsoft and Yahoo!. Despite working since January 31 of this year, as well as in the early part of last year, we have never been able to reach an agreement in a timely way on acceptable terms with the current management and Board of Directors at Yahoo!. We have concluded that we cannot reach an agreement with them. We confirm, however, that after the shareholder election Microsoft would be interested in discussing with a new board a major transaction with Yahoo!, such as either a transaction to purchase the “Search” function with large financial guarantees or, in the alternative, purchasing the whole company.” That sure sounds a lot different than “We’re not interested in buying Yahoo!,” stance recently taken by Microsoft CEO Steve Ballmer.
 
This also comes on the heels of last week’s news that Yahoo! is potentially involved in talks with Time Warner and News Corp regarding potential alliances, mergers or partnerships.

Yahoo! has a unique asset. Yahoo! CEO & Founder Jerry Yang knows it. Carl Icahn knows it. Microsoft knows it too. The plot thickens. Will Jerry Yang be able to keep his baby independent or is Yahoo!’s destiny to be absorbed by a giant or maybe even get dismantled? Good luck Jerry.

Economic conditions here in the U.S. continue to deteriorate. Last week, the U.S. Bureau of Labor Statistics reported that there was a net loss of 62,000 payroll jobs in June, marking the 6th straight month of job losses, now totaling over 400,000 for the year. On that, my next blog will likely discuss the PPC advertising environment during recession.