microhoooooo

Microsoft bid for Yahoo at $31 a share in a bid to gain some market share in the rapidly evolving online ad industry.

An earlier post on this blog here, expressed the possibility of consolidation with Microsoft buying Yahoo. Microsoft senior leadership was astute and kept this possibility on bay for a while. They made their move with an unsolicited bid when the Yahoo stock was beaten down due to lacklustre performance by Yang and the Gang. Larry Ellison moves in similar ways.

The media expressed that there may be anti-trust problems. Now, you gotta be kidding me! Together Microsoft and Yahoo will cover only a quarter of the total space that Google commands. I learnt at least this much in my Business Law class from Prof Hersch. I am not sure why the popular media made these comments. This just indicates how the media runs hurriedly to create sensational headlines rather than providing any thought to it. None other than CNBC said this and other channels followed suit ! This sad display of journalism reminds me of Prof Chris Telmer, who used to rip apart the pink press (financial press) for spreading false notions in the minds of the naive readers. Astute and educated investors read most of the pink media with a grain of salt due to such incidents.

Of course, Yahoo and Microsoft have huge share of email accounts. However, I am not yet sure if they have good enough products to target ads in that fashion. If they build it together, they will save money on building that. May be both already have products in the pipeline...who knows.

Going ahead, we will witness some interesting times in the search space.
1. MSN Money must leverage Yahoo Finance for their content but not the UI. The international market and eye balls (remember - Jewels at the bottom of the pyramid!) that MSN Money will get with the inclusion of Yahoo Finance content on MSN Money will surpass that of Google Finance easily.

Google Finance does not have any grip in the foreign markets - for instance, the Indian market. Whereas Yahoo Finance has a good set of data (though there is room for improvement for the international markets. Besides they roll no the RIC codes and hence, have a standardized convention for naming the stocks.

2. We will have a very colorful time watching the titans clash for the online ads market. MSFT has been ramping up its Live Search staff with good talent from around the globe. They have some way to go in order to make themselves equivalent to that of GOOG. However, they are on the right path.

3. Will MSFT be able to retain the top talent from YHOO? or will they be bought away by GOOG or facebook? Time will tell. Most of the sources I talk in Yahoo with tell me that they will not like to work for MSFT given that when they chose their careers - they had a choice and they actively chose YHOO over MSFT.

Another take on it is that this was a la The Art of War move by MSFT in which MSFT doesn't engage YHOO into a battle but just surrounds it. YHOO has nowhere to go. Mr. Yang and Gang could not maintain a high valuation for the ailing online giant. GOOG cannot make a bid as they dont want another regulator hassle from the DOJ for another anti-trust trial (this time it will be fatal).

In conclusion, 31 bucks a share is not a bad price to pay considering the additional steady revenues it will bring in. Microsoft senior leadership was astute and kept this possibility on bay for a while. Let us see how YHOO responds to this bid.

branded entertainment

Date: 10-18-2007
Venue: HBO office in midtown – 1100 Avenue of the Americas, New York, NY.

Organized by – IRTS Foundation, a foundation that offers New York City based educational luncheons, seminars, and workshops which cater to a diverse range of media interests

Speakers:
Advertisers:

§ Robert Friedman – President, Media & Entertainment, Radical Media

§ Robert (Bob) Riesenberg – President & CEO, Full Circle Entertainment

Network folks:

§ Dan Longest – Sr VP, Integrated Marketing & Promotions, ABC

§ Linda Yaccarino – Exec VP & Gen Manager, Turner Entertainment, Ad Sales & Marketing

Hollywood Reporter rep, Gail Schiller was the moderator for the Q&A session.

Event description:

The event had response from 70-80 folks and about the same number of turnout. It was well-organized as it made the most optimal use of everyone’s time. A set of pre-chosen questions were asked for the large majority of time and then the podium was opened for the audience for about 15 mins or 2-3 questions

Audience:
Broadcasting and Publishing were the two prime domains of the audience.

Notes from the Q&A:

Branded Entertainment’s demand drivers:

§ Declining engagement power of the 30-second TV spot – however, its not going to go away

§ Fragmentation in the media industry – this leads to difficulty in reaching critical masses

§ Time-shift leading to use of devices such as the TiVo.

BE’s demand has increased by multiples but the supply is restricted. There are very few advertisers who don’t ask for BE. The networks cannot supply enough BE because:

§ Relevance: They want to have the right spot in the program for the right brand

§ Limited inventory: The networks want to ensure that the inventory does not lose ratings due to incessant brand-placements.

§ They may not be ready themselves (this was not discussed at all)

T&T has a focus on micro-series, why?

§ Mobility – multi-layered communication

§ The other means are not enough for the advertisers

Business models are one of the two:

§ Revenue sharing

§ Barter system

Mostly, it is the latter in case of large networks as they are not running behind the ad agencies.

Challenges:

§ Infancy stage of the industry

§ Impatience shown by the advertisers – Ratings, Retention, Recall become a challenge for the networks if they don’t turn down the impatient advertisers

§ Focus: Large project teams – cross-functional service areas within the networks and/or ad agencies. In order to address this issue, liaison groups are being formed (say Promo development group at Turner which liaisons between the ad sales group and the programming group)

§ Fit: Brand must fit naturally with the content, adding to the story in a relevant and a tangible manner. However, folks are bringing in money to get irrelevant stuff done. This may kill the industry in its pre-mature stage.

§ Scalability: Limited inventory and controlled environment by the networks leads to lack of scalability in the model. Networks have the control. They do exert it. However, they are undertaking initiatives for the same – such as staff augmentation and/or staff training in the BE direction.

New trends:

§ Pressure on “creatives”: Creatives are going to find themselves squeezed due to the huge demand for the BE content. Network sales folks have aligned themselves with the best interest of the network. For instance, for the network sales folks, the focus has changed from selling programs to selling “commercial pods”. This will further put pressure on creatives to align themselves with network’s objectives.

I think this can lead to inflation of wages or significant terms and conditions change for the writers. Writers’ guild has already asked compensation for brand placements in their scripts.

§ Cross-media: A new emerging trend is in the increasing demand for cross-media BE.