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February 1, 2008

February 1, 2008

Search Headlines & Links: February 1, 2008

Want a snapshot of the day's search marketing news? Here we've collected today's top news stories posted to the Search Engine Watch Blog, along with search-related headlines from around the Web:

From the SEW Blog:

Headlines & News from Elsewhere:

Posted by Kevin Newcomb at 5:51 PM | Permalink

Super Bowl Advertisers Mostly Unprepared, Search-wise

It seems that every year it's the same story. Advertisers pony up big bucks to create and air an ad during the Super Bowl, then fail to prepare for what most people are going to do when they get back home after the game or to work on Monday: search for the ads they saw.

This year seems to be shaping up in much the same way, unfortunately. We'll look at the full results on Monday, but in preparation for the big game, Reprise Media's Peter Hershberg takes a look at the search presence of some past and potential advertisers in today's SearchDay, "Super Bowl Advertiser Search Trends."

To keep up with the ads during the game, you can follow "Scorecard" on Twitter. That's an account that Reprise Media set up for just such a purpose.

Posted by Kevin Newcomb at 5:31 PM | Permalink

The Other Side of the MS/Yahoo Deal

It’s pretty obvious that this is all about the ad dollars. But they only get those dollars because we all go online to find news and information.

Eyetrack studies have shown us that many more people look at and click on organic search results than ads or sponsored links. So what would this merger mean in term of a search experience, organic results and news content?

comScore Media Metrix latest figures show Google now controls nearly 60% of the U.S. search market, and has been widening its lead, despite concerted efforts by both second-place Yahoo and third-place Microsoft. By combining, Microsoft and Yahoo would have close to 30% of the U.S. search market.

Speaking at the announcement early this morning Ray Ozzie, Chief Software Architect at MS, said "Social platform will become a new entry point," and called Yahoo pioneers in this field. "We can further accelerate the transformation to a more social web."

Sounds promising. Perhaps Yahoo’s innovative thinking and social media smarts combined with Microsoft’s deep pockets might give us a better search experience in the long run.
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In terms of news search Yahoo is top of the list with over 30 million readers and Google is only at at #7 with just under 10 million. (Could this have been one factor in Google’s decision to feature news on their web SERP’s?)

How this merger will affect our organic search experience and the online news audience remains to be seen. Since they want the ad dollars they will have to draw the users and to do that they need to up their game and improve the organic search function.

Posted by Sally Falkow at 2:23 PM | Permalink

Yahoo Board, Sans Semel, to Consider Microsoft Bid

Yahoo's board of directors has issued a statement saying it will evaluate Microsoft's unsolicited bid to acquire Yahoo for $44.6 billion. Not surprisingly, the board will be doing so without the input of former CEO and chairman Terry Semel, who stepped down as chairman last night. He was replaced as CEO by founder Jerry Yang back in June, and has been busy staffing up his old Windsor Media venture, though it remains to be seen what form that former investment firm will take. Roy Bostock, who has sat on Yahoo's board since May 2003, was elected to serve as non-executive chairman.

Semel's departure may bode well for a potential Microsoft deal, since he's been vocal in his disdain for such a merger. It also won't hurt that Yahoo's been shedding executives for the past year, so at least some of the potential redundancies are already dealt with.

On a conference call this morning to discuss the acquisition, Kevin Johnson, president of Microsoft's Platforms and Services Division, suggested that Microsoft's offer would be the only one Yahoo could get, given anti-trust concerns that would prevent Google from making an offer. he played on the underdog theme, saying, "The fact is the industry will be better served by having a more credible alternative" in search and advertising.

Posted by Kevin Newcomb at 10:11 AM | Permalink

MSN and Yahoo Merged: How Would It All Mash Up?

Hold on tight SEM artists. Search marketing is mainstream bacon & eggs in America this morning. Even the “tease†story on the Today show was Microsoft’s “huge takeover bid to purchase struggling†Yahoo!

Microsoft’s profits have been soaring due to increased demand for computer software. Yahoo is in the dumper, having just laid off 1,000 people. Is this acquisition finally real?

In 2006, the SearchEngineWatch blog was aBuzz with “Microsoft buying Yahoo†posts and hashing out possibilities in search marketing forum chit-chat threads. The Wall Street Journal prognosticated about the possibility of “a major departure for Microsoft." They wrote, "Microsoft has considered the idea of acquiring a stake in Yahoo, and that the two companies have discussed possible options over the course of the past year.â€

Some SEMs who love major search engine drama games saw this one coming down the pike years ago, and are still salivating. For others, the very idea would be hell. Personally it makes me just giddy.

The potential implications for both organic and paid search marketing could be del.ici.us for the Microsoft desktop. For PPC the much maligned Panama and AdCenter paid advertising platforms, along with all their graphically beautiful albeit dysfunctionalretarded inadequacies, could be fixed.

Think about the intriguing social media marketing adventures which would be possible. Maybe Yahoo Answers will integrate in Windows Mobile OS. Office 2009 might just include Word documents sporting a new “Insert/Flickr Image" function. How does this affect the market landscape for Google’s much heralded GPhone initiative. An aligned Yahoo/MS mobile platform-play would no doubt be a fascinating addendum to the Linux vs. Windows shoot out.

How will Yahoo email mashup with Outlook? What would pumping Yahoo Pipes into the MS machine mean to the feed aggregation paradigm? How would Microsoft create marketing mechanisms marketing to the decade old Yahoo Personals social graph?

The list goes on. MSN AdCenter was the first mainstream engine to dabble in demographic targeting, but the interface is weak. One would hope a combined Yahoo/MS team would know what to do with reams of data Yahoo has gathered about us all.

Aside from the potential effect on Yahoo/MS investors and the American economy (which will be reported on ad nauseum), the implications for the search marketing industry could be massive and exciting. Stay tuned. It might finally be true. Hold on tight search marketers and we'll see how it all mashes up.

Posted by Marty Weintraub at 10:02 AM | Permalink

Paid Search Advertising Drives Microsoft Bid for Yahoo

The Microsoft conference call yielded little new information about the details of the Yahoo bid. Steve Ballmer stressed that scale and efficiency in online advertising platforms would drive the success of the deal. Microsoft execs said R&D innovations would drive breakthroughs in vertical search, mobile search, social search, and natural language search.

Nice thought; won't work in the marketplace.

More "relevant" search results and social media innovations won't solve the problem of Google's dominance in paid search advertising. Microsoft-Yahoo still need to beat Google brand equity and searcher loyalty. Search is a habit. For some, search is an online addiction.

Switching costs may be low --and search engine alternatives are "one click away" - but Microhoo will still need to win over the Google ravers and junkies.

When Microsoft or another suitor finally buys Yahoo , no one need feign surprise. The Redmond giant finally went public with a formal buyout offer because the Yahoo board (sans Semel) won't fight back. The last bid was rumored to be $50 billion. Today's offer comes in at $44.6 billion because Yahoo stock price dropped below $20 per share.

Look for other bidders to force Microsoft to pay a higher premium. While display advertising is a key driver for creating two super-portals on one efficient ad serving and ad management platform, Microsoft-Yahoo would never win government approval unless Google had achieved what some call near-monopoly leadership in paid search.

Yahoo Panama -- Yahoo's paid search auction algorithm and search ad platform would move to Redmond even if the Yahoo engineers remain in Silicon Valley. MSN adCenter is innovative, but Yahoo Panama improved topline revenue -- although not as much as Wall St. and Jerry Yang would have liked.

Some reports had attributed Microsoft's urgency to close a Yahoo deal to Google's successful bid for DoubleClick. Formal negotiations between the two companies are clearly driven by Google's dominance of paid search and share of searches. Today's conference call confirmed that Google's dominance in paid search advertising -- pegged at 75 percent of worldwide paid search share by Kevin Johnson,

The revenue engine that drives search engines is auctioned paid search (PPC) advertising. As Pay-Per-Click advertising has evolved, traditional banner ad networks suffer from consumer banner blindness. That's led to the rise of behavioral targeting, or more accurately, "search re-targeting" -- another key driver of today's deal.

Neither Yahoo Search Marketing nor MSN adCenter has made significant inroads in creating a search management or web analytics platform to rival those of Google. Microsoft's acquisition of DrivePM, for example, through the Aquantive acquisition was immaterial to MSN search and online advertising revenues.

Microsoft and Yahoo have held informal talks for years -- with neither company making inroads against Google. As recently as May, Yahoo has turned down an unconfirmed offer worth $50 billion to Yahoo shareholders. On the call, Steve Ballmer said the companies have been in talks for $18 months, and confirmed that Jerry Yang had nixed his initial offer, citing timing as the reason.

Given Yahoo's share price, it's unlikely Yahoo shareholders will give Yahoo execs more time to turn around the company's fortunes. Terry Semel's resignation from the Yahoo board last night removes the last vestiges of his controversial reign as Yahoo's chief.

So the pundits and reporters who attribute Microsoft's bid to ego -- "stung" by the success of Google's DoubleClick bid -- don't understand the fundamentals of paid search. Steve Ballmer does -- and he knows he can't beat Google without adding Yahoo's critical mass. It's not about winning or losing a bid for a rival's ad serving platform.

Yahoo and MSN couldn't solve the paid search puzzle. Now, it's costing both companies billions.

Posted by Kevin Heisler at 7:44 AM | Permalink

Microsoft Wants to Buy Yahoo: Convergence, Continued

There have been rumors of late about some sort of Microsoft/Yahoo hookup -- and here it is. Microsoft just tendered a $31/share bid for Yahoo. All of Yahoo.

It's about the advertising. From the press release: "The online advertising market is growing at a very fast pace, from over $40 billion in 2007 to nearly $80 billion by 2010. The resulting benefits of scale along with the associated capital costs for advertising platform providers make this a time of industry consolidation and convergence. Today this market is increasingly dominated by one player. Together, Microsoft and Yahoo! can offer a competitive choice while better fulfilling the needs of customers and partners."

Steve Ballmer, Microsoft CEO said in a statement: "We have great respect for Yahoo!, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market."

After the jump, Ballmer's letter to Yahoo board members. We'll be following developments closely, promise.

Dear Members of the Board:

I am writing on behalf of the Board of Directors of Microsoft to make a proposal for a business combination of Microsoft and Yahoo!. Under our proposal, Microsoft would acquire all of the outstanding shares of Yahoo! common stock for per share consideration of $31 based on Microsoft's closing share price on January 31, 2008, payable in the form of $31 in cash or 0.9509 of a share of Microsoft common stock. Microsoft would provide each Yahoo! shareholder with the ability to choose whether to receive the consideration in cash or Microsoft common stock, subject to pro-ration so that in the aggregate one-half of the Yahoo! common shares will be exchanged for shares of Microsoft common stock and one-half of the Yahoo! common shares will be converted into the right to receive cash. Our proposal is not subject to any financing condition.

Our proposal represents a 62% premium above the closing price of Yahoo! common stock of $19.18 on January 31, 2008. The implied premium for the operating assets of the company clearly is considerably greater when adjusted for the minority, non-controlled assets and cash. By whatever financial measure you use - EBITDA, free cash flow, operating cash flow, net income, or analyst target prices - this proposal represents a compelling value realization event for your shareholders.

We believe that Microsoft common stock represents a very attractive investment opportunity for Yahoo!'s shareholders. Microsoft has generated revenue growth of 15%, earnings growth of 26%, and a return on equity of 35% on average for the last three years. Microsoft's share price has generated shareholder returns of 8% during the last one year period and 28% during the last three year period, significantly outperforming the S&P 500. It is our view that Microsoft has significant potential upside given the continued solid growth in our core businesses, the recent launch of Windows Vista, and other strategic initiatives.

Microsoft's consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers. In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together. These discussions were based on a vision that the online businesses of Microsoft and Yahoo! should be aligned in some way to create a more effective competitor in the online marketplace. We discussed a number of alternatives ranging from commercial partnerships to a merger proposal, which you rejected. While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing.

In February 2007, I received a letter from your Chairman indicating the view of the Yahoo! Board that "now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction." According to that letter, the principal reason for this view was the Yahoo! Board's confidence in the "potential upside" if management successfully executed on a reformulated strategy based on certain operational initiatives, such as Project Panama, and a significant organizational realignment. A year has gone by, and the competitive situation has not improved.

While online advertising growth continues, there are significant benefits of scale in advertising platform economics, in capital costs for search index build-out, and in research and development, making this a time of industry consolidation and convergence. Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers. Synergies of this combination fall into four areas:

-- Scale economics: This combination enables synergies related to scale
economics of the advertising platform where today there is only one
competitor at scale. This includes synergies across both search and
non-search related advertising that will strengthen the value
proposition to both advertisers and publishers. Additionally, the
combination allows us to consolidate capital spending.
-- Expanded R&D capacity: The combined talent of our engineering
resources can be focused on R&D priorities such as a single search
index and single advertising platform. Together we can unleash new
levels of innovation, delivering enhanced user experiences,
breakthroughs in search, and new advertising platform capabilities.
Many of these breakthroughs are a function of an engineering scale that
today neither of our companies has on its own.
-- Operational efficiencies: Eliminating redundant infrastructure and
duplicative operating costs will improve the financial performance of
the combined entity.
-- Emerging user experiences: Our combined ability to focus engineering
resources that drive innovation in emerging scenarios such as video,
mobile services, online commerce, social media, and social platforms is
greatly enhanced.

We would value the opportunity to further discuss with you how to optimize the integration of our respective businesses to create a leading global technology company with exceptional display and search advertising capabilities. You should also be aware that we intend to offer significant retention packages to your engineers, key leaders and employees across all disciplines.

We have dedicated considerable time and resources to an analysis of a potential transaction and are confident that the combination will receive all necessary regulatory approvals. We look forward to discussing this with you, and both our internal legal team and outside counsel are available to meet with your counsel at their earliest convenience.

Our proposal is subject to the negotiation of a definitive merger agreement and our having the opportunity to conduct certain limited and confirmatory due diligence. In addition, because a portion of the aggregate merger consideration would consist of Microsoft common stock, we would provide Yahoo! the opportunity to conduct appropriate limited due diligence with respect to Microsoft. We are prepared to deliver a draft merger agreement to you and begin discussions immediately.

In light of the significance of this proposal to your shareholders and ours, as well as the potential for selective disclosures, our intention is to publicly release the text of this letter tomorrow morning.

Due to the importance of these discussions and the value represented by our proposal, we expect the Yahoo! Board to engage in a full review of our proposal. My leadership team and I would be happy to make ourselves available to meet with you and your Board at your earliest convenience. Depending on the nature of your response, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!'s shareholders are provided with the opportunity to realize the value inherent in our proposal.

We believe this proposal represents a unique opportunity to create significant value for Yahoo!'s shareholders and employees, and the combined company will be better positioned to provide an enhanced value proposition to users and advertisers. We hope that you and your Board share our enthusiasm, and we look forward to a prompt and favorable reply.

Sincerely yours,

/s/ Steven A. Ballmer
Steven A. Ballmer
Chief Executive Officer
Microsoft Corporation

Posted by Rebecca Lieb at 7:08 AM | Permalink

SEW Experts: Why All Links Are Paid Links in the Travel Trade

Google, Yahoo, and MSN aren't going to quickly discount some long-standing links, reciprocal or not. In today's Vertical Challenge column, "Why All Links Are Paid Links in the Travel Trade," travel search expert Elisabeth Osmeloski explains that the paid links debate isn't so black and white. The question of what truly constitutes a paid link, and what qualifies as advertising, will continue to be a huge point of contention.

Posted by Kevin Newcomb at 12:00 AM | Permalink

SEW Experts: Rewriting URLs: SEO for CMS, E-Commerce, and Dynamic Sites

There's as much confusion and controversy surrounding URL rewriting as Darwin's theory of evolution. In today's SEM Crossfire column, "Rewriting URLs: SEO for CMS, E-Commerce, and Dynamic Sites," Chris Boggs says that just as Darwin's "survival of the fittest" means species most suited for their environment will adapt and survive, URLs need to adapt too.

Posted by Kevin Newcomb at 12:00 AM | Permalink

SEW Experts: Optimizing the Planet: SEO on a Global Scale

When building an SEO team to provide global services, it's necessary to recruit skilled, multilingual SEO experts -- no easy task. In today's Outsourced column, "Optimizing the Planet: SEO on a Global Scale," William Flaiz shows that the benefits of investment in infrastructure are reaped across both the domestic and international playing fields.

Posted by Kevin Newcomb at 12:00 AM | Permalink

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