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Semel Shutters Windows Deal while Ballmer Waxes on the Future
By Jim Hedger, StepForth News Editor, StepForth Placement Inc.
May 12 2006
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Yahoo is not going to sell its self in part or whole to Microsoft. Over
the past two weeks, there have been rumblings of a potential merger
or outright acquisition involving the two tech giants. In an interview with
the Financial Times, “Yahoo
rebuffs Microsoft offer”, Yahoo
CEO Terry Semel confirmed rumours regarding discussions between the
two firms but stated unequivocally that Yahoo is not for sale.
“The search business has been formed”, said Semel. “My
impartial advice to Microsoft is that you have no chance.”
Semel was speaking to a group of media executives at a conference organized
by Syracuse University’s Newhouse School of Journalism on Wednesday.
In his session, he shed some light on the topic of talks between Yahoo and
Microsoft. He also spoke about his views on the future of search noting
social search as the next evolutionary step.
Microsoft and Yahoo had been in discussions for some time as part of a
general exploration of plans to cope with Google’s dominance of the
search business. From the tone of Semel’s comments, those talks did
not lead to any deepening of relationships between Yahoo and Microsoft.
In fact, relationships between the two firms appear to be strained. Semel
spoke specifically about Yahoo’s wish to continue serving paid advertising
results via Yahoo Search Marketing (YSM) to MSN search. Microsoft decided
to allow that deal to expire in order to replace YSM with paid ads generated
through its new internal paid advertising program AdCenter.
Microsoft was interested in buying a stake in Yahoo search however Semel
says he was not willing to sell a portion of the company. Semel admitted
Yahoo and Microsoft had discussed, “… Microsoft co-owning some
of our search”, but stated, “I will not sell a piece of search
- it is like selling your right arm while keeping your left. It does not
make any sense.”
Semel also mentioned some of his ideas on the future of the search medium.
The business of search and provision of search results is changing rapidly
though Semel expects those changes to be manageable for larger firms like
Yahoo.
"I do not expect search to decline but it may not be the way you do
it two or three years later," he said. Semel said he sees a great deal
of growth in social networking and online video, noting the growing availability
of broadband access in the US and around the world is ushering in an era
in which video becomes standard content on the web.
In 2004, Yahoo announced its intention to create video content for its
users however Semel said many of those plans have been shelved because they
were too similar to content already available on commercial television.
"Television does a very good job," Semel
said. "This medium
better look like something new. This medium better take advantage of its
assets, take advantage of what it does well. ... If what we do looks like
television, then we're making a huge mistake."
Yahoo continues to make content provision a high priority however much
of that content will likely be syndicated from other sources.
Semel mentioned social networking as a likely future model for search saying, “Knowledge
search, as they call it in Korea, or social search, as we call it, has blown
through the roof. There may be changing dynamics."
Meanwhile, over in Microsoft’s camp, CEO Steve Ballmer appears to
be in fighting trim playing point guard against Google’s towering
offensive while lobbing set-up passes regarding Microsoft’s plans
toward the press. In a wide-ranging article published in Cnet
News.com,
Ballmer responds to a number of comments directed at Microsoft in the past
weeks.
Ballmer doesn’t appear to be concerned about Yahoo but he is obviously
burning over some of the comments Google co-founder Sergey Brin levelled
at Microsoft during a press conference on Wednesday’s Google Press
Day.
Referring to the default settings of Microsoft’s upgraded browser
IE 7 and the pending release of the Microsoft Vista operating system, Brin
was quoted saying, "We just see the history of that company behaving
anti-competitively and not playing fair. So I think we want to...look at
the areas where that power can be abused."
Suggesting Google expects special treatment from Microsoft, Ballmer couldn’t
resist the temptation to take a few pot shot at Google while comparing Microsoft
products to Google’s offerings.
"Can you imagine writing a letter to someone," he said, "'Hey,
Mom, I am upset with the gun policy.' Then an ad pops up and says, 'Hey,
do you want to buy a gun?'"
Ballmer stated that most Microsoft products will remain separate from advertising
noting that, “…Even though Microsoft will have ad-supported
applications, a lot of people will want a standard desktop Office.”
Microsoft is a distant third behind Google AdWords and Yahoo Search Marketing
in terms of market share and revenues. It hopes to change that through the
introduction and marketing of AdCenter, as well as by expanding into ad
distribution in video games.
Earlier this month, Microsoft purchased Massive, a company that inserts
advertisements into online video games. Imagine, if you will, a first-person
strategy game that takes place in a city. Billboards, posters and other
pieces of scenery can be instantly updated throughout MSNs gaming network.
"We want to make sure there is good, healthy competition in the advertising
space," Ballmer said. "Everybody deserves good competition. People
have been telling me that for years."
Based on notes taken by CNet news writer Michael Kanelloa, Ballmer is also
interested in social networking, with a particular emphasis on FaceBook.
He quotes Ballmer saying, "I've spent a lot of time studying FaceBook.
I think there is a lot we can learn from the FaceBook concept." Remaining
bearish on technologies that do not have clear revenue models such as YouTube
and BitTorrent Ballmer suggested that Microsoft would continue to look at
acquiring start-up companies.
Yahoo CEO Terry Semel and Microsoft CEO Steve Ballmer are both concerned
about Google. They appear interested in perusing similar technologies and
both perceive virtually limitless futures.
Yahoo’s strongest assets are in its network of branded information
directories, its emerging Yahoo Publisher Network, and in its search marketing
business YSM. Having one of the most well recognized global brand names,
combined with the enormous amount of content it generates, Yahoo is capable
of retaining its second place position in search advertising.
Putting aside its control of the basic operating system on most personal
and corporate computers, Ballmer sees patience as Microsoft’s greatest
asset. “We have tenacity and a persistence and patience to stay after
it and stay after it and stay after it. Patience is what distinguishes us
from many technology companies that are important….”
Patience has proven to be a key ingredient in the development of the Vista
operating system. That makes sense given patience is a necessary virtue
practiced by all Windows users.
Historically each of the major players, Google, Yahoo and MSN has competed
by staking their own turfs and making minor, and in many cases major incursions
into each other’s turf. It often resembles a game of “follow
the leader” in which 3 firms, based on their own merits are in a position
to act as the leader. How it all works out will be part of our collective
history but while it plays through, it is one of the most interesting games
going.
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