Last night a source of mine sent me a text message about spotting Jerry Yang and David Filo (in a suit) at Palo Alto’s Four Seasons Hotel in company of some serious looking men, who spend a lot of time (and money) appearing to be self-important, a skill they perhaps learn in business school. His pithy message to sum it all up — looks like it is all going down.
The “it” is Yahoo’s very public auction of itself to the highest private equity bidder. In case you were hiding under a rock, here is a recap of rumors around Yahoo’s possible sale:
- Silver Lake Partners wants to buy a minority stake in Yahoo for about $16.60 a share (valuing Yahoo at $20.6 billion or about 6 percent higher than yesterday’s closing price.) Silver Lake is working with Microsoft and Andreessen Horowitz.
- The transaction is going to use PIPEs, private investment in public equity — a type of transaction long reserved for somewhat dubious companies.
- Jerry Yang will stay on the board, but the investors will get three seats on the board, reports say.
- Some folks believe that Jeff Jordan, former CEO of OpenTable, will become the chief executive of Yahoo and VC Marc Andreessen will become the chairman.
- TPG Capital is considering offering a $1 per share more — aka $17.60/share.
- Others are also eyeing the company including KKR and Blackstone Group.
- Thomas H. Lee Partners is thinking about a bid.
- Alibaba Group wants to buy Yahoo. Yahoo owns 40 percent of the Chinese company. Kara Swisher says they are thinking about teaming up with Softbank and Blackstone for their own bid.
600 million
Last time I wrote about Yahoo and its dismal and disastrous board of directors, I pointed out that 600 million users make up Yahoo’s biggest asset (and biggest stumbling block) and that company needed to clean house and then go shopping. Most of the people in comments disagreed and said that no self-respecting startup would want to be part of Yahoo.
Instead, most felt that the company should clean house and focus on a few pockets of growth inside the company — communications and shopping for example. I am betting buyers will be thinking along those lines, but will that be enough?
Whatever comes of these moves, the question is, can Yahoo be saved, and if yes, what is the value that can be retrieved? More importantly, will these private equity investors meet their own tech Waterloo in the fallen Internet star?
Dead Fish
As far as I am concerned, Yahoo is pretty far gone and is essentially a hollow shell of its former self. Its board – probably the single worst group in business – has managed to drip every last drop out of its body. There are few bright spots — Flickr, Yahoo Mail and Yahoo Shopping — but they cannot make up for the singular reality that the Internet that helped Yahoo thrive is no longer the Internet most people use.
Behavioral shifts in the Internet are so strong that Yahoo has no chance. The average U.S. Facebook user is spending over six hours a month day on the social network, Twitter is becoming the new news network and photos are thriving on mobile platforms.
The Internet of today is one of many screens. Yahoo, despite its mobile products and wonderful experiments with Yahoo TV, is still a one trick pony — online advertising. More accurately, the classic CPM-style advertising depends on large audiences, lots of page views and well, you get it, an old-fashioned way of thinking. When I think of Yahoo, I am reminded of a salmon farmed on carcinogens that is trying to move upstream in order to find growth.
Smart guys, but…
The consortium that is making a push for Yahoo is the same group that went out and bought Skype from eBay and turned around and flipped it to Microsoft, and in the process they made a lot of money.
However, this is not the same case. Skype was and still is on the right side of history. Usage behavior favors Skype, which continues to grow despite the company having ruined a great user experience. Skype is thriving despite all the meddling from the previous owners. Microsoft can’t do anything because Skype provides value.
What does Yahoo do that you and I can’t live without?
That’s right … nothing!
I have a lot of respect for Jeff Jordan (who would actually be one of my choices to run Yahoo), but I am sorry even he cannot do the impossible. Yahoo’s brain drain is legendary and it continues. There are more resumes going out of Yahoo than there are folks lining up to work for Yahoo. Unless there is a tech/broad economy collapse, that situation isn’t going to change.
Frankly, if you were a smart engineer or a product guy, why would you go work for a company, which is going to be owned by buyout guys who essentially nickel-and-dime your creativity to death? Why not go and work for a startup, where the chances of an upside, however remote they might be, are still there.
Or better yet, take a flyer and start your own company. Hell, if you need a job, these days even Google is pretty lax about hiring. The fact is that the buyout philosophy might work on old industrial-age companies, but I am not sure it would translate to Internet companies.
Related research and analysis from GigaOM Pro:
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There’s a strange thing brewing in them there Interwebs right now. It’s the story of Mozilla and Google, a partnership made in heaven, and the burning question of whether or not that partnership will continue. In case you’ve not been following along, the search partnership means that a default installation of Firefox will have Google as the search box provider. In return, Mozilla gets money. A lot of money.
But the deal is up, at least in its current form. It expired in November, leaving Mozilla with the potential loss of over 80% of its revenue unless a new contract could be reached.
In a case of interesting timing, Mozilla has recently introduced a version of “Firefox with Bing“, with the stated aim of “making it easier” to use Bing as the default provider for the browser.
Are feathers ruffled at Google? Well, nobody seems to be talking. Or, more clearly, both Mozilla and Google are talking but neither of them is really saying anything. At present, the word from Mozilla is this:
“Our search relationship with Google remains positive for both of us. We are in active negotiations and have nothing further to announce at this time. We have every confidence that search partnerships will continue to be a strong and growing generator of revenue for the foreseeable future.”
Let’s break this down from PR-speak into what’s really being said — “If we (Mozilla) can keep a partnership, we keep getting money. But you’ll notice that we said “search partnerships”, not “Google partnerships” and that leaves a pretty open door to inking deals with other providers, too.”
In short, it’s entirely possible that Mozilla is exercising (or at least investigating) a funded partnership with Microsoft to have Bing as the default search client in Firefox. As Bing continues to grow in popularity, nipping at the #2 spot that’s presently held by Yahoo, there’s no doubt that the engine could put to good use a traffic injection provided by Firefox.
But Firefox’s numbers are starting to wane somewhat. Mozilla today released a reminder video, of sorts, to jog your memory on the subject of why you should care about Firefox. It comes just days after we learned that Google’s Chrome browser has overtaken Firefox in the worldwide rankings. So if feathers are ruffled, it’s likely that they’re not only in Google’s camp.
So where does this leave Google? The readily-available answer is that Google no longer needs Firefox, because it has its own source of search traffic in Chrome. Back in 2006 when this deal was first inked, Chrome didn’t exist. In fact, Chrome wasn’t around until 2008, and the latest deal was extended in 2008 to run into 2011, giving Google plenty of runway to ramp up its own browser’s usage before cutting off ties.
The end result? Unfortunately, nobody outside of the two camps knows just yet. But it’s an interesting twist to what could be considered an “old” partnership by Internet standards. Is now the time for Mozilla to move away from Google, and into a relationship with Bing? Bing could use the boost, Mozilla could use the cash and Google doesn’t necessarily need either of those. The times they are a’changin’.
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