Stay on Target
The big cap online media musical chairs is almost complete. Long time readers of this blog will know that I believe that Yahoo won’t be acquired by Microsoft right away and that Microsoft will acquire AOL instead. The reason Yahoo will escape the clutches for a year is that they will decide to partner with Google on search ads (but not organic search indexes).
It is absolutely mind boggling that Yahoo has not run these tests sooner. Here is what I said in December of 2006. Yes 2006:
“The monetization gap in search is unnacceptable and it is time to turn up the heat. Sign a deal with Google much as Ask and AOL have: 90% of 11 cents a search is better than 100% of 4 cents a search (and not even taking into account the overhead in the 4 cents a search).
Don’t give up yet though. Run Google ads in 20% of the search queries to Yahoo. Track everything about the implementation - the ads Google chooses to show on the search, which ads users click on, what those users do elsewhere on the Yahoo network etc. Learn everything you can and implement the conclusions into Panama.
Give the team 12 months to bridge the gap or to substantially bridge the gap. If they can’t (with all that information from Google’s ad selection and user behavior), consider giving up and just running Google ads next to Yahoo’s organic search.”
When I think of Yahoo I think of Hugo Weaving’s Agent Smith character and the line: “Do you hear that Mr Anderson? That is the sound of inevitability”.
I believe partnering with Google on search ads gives them another year of independence. I have zero confidence they will have the intelligence to fully give up in this area and marshall all their resources around remnant display (the most promising opportunity in online ads and which they have fantastic assets).
Rupert is wisely throwing his hat in the ring and hopes that someone can at least give Fox Interactive/MySpace a credible valuation of $6-7bn so that investors in News Corp wake the fuck up but I believe he is indifferent to whether a transaction gets done or not: he just needs some external validation so that investors correctly value News Corp as a whole. And besides, the chances of the deal getting done are miniscule.
