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Liveblogging Yahoo's Q1 Earnings Call: Get Me to Funky Town

Kara Swisher — Tue, 19 Apr 2011 21:21:01 +0000

MicroHoo is funky!

At least according to Yahoo CEO Carol Bartz on the Silicon Valley search giant’s first-quarter earnings conference call about its recent financial performance.

Yahoo’s results showed a continued worrisome revenue growth stall, due in large part to a search advertising fall-off, and a still-turning turnaround.

Yahoo reported revenues of $1.06 billion, down six percent from a year ago, on net earnings of 17 cents a share, down 28 percent.

The results were essentially in line with Wall Street expectations.

2:03 pm PT: The call started right on time, as per usual. Maybe they can’t get search right anymore, but Yahoo execs sure know how to start an analysts’ confab.

Bartz started off the call, noting “overall, our turnaround is proceeding on schedule.”

Well, the schedule of a three-toed sloth, I suppose, but it’s on schedule!

Bartz is too smart, though, and quickly noted the problems with search revenue declines, related to its search and online advertising partnership with Microsoft.

Still, she then used the unusual term “funky comparisons” to dismiss the key issue.

But isn’t she the one who struck the funky deal with Microsoft that has resulted in these funky comparisons and these even funkier search advertising revenues?

Just askin’!

Bartz proceeded quickly to noting Yahoo’s advances due to technology improvements, which showed a doubling of impressions to big events such as the Super Bowl and the Oscars.

It’s a good point, since Yahoo–for all its troubles–is still a huge traffic driver, including serving up 1.3 billion page views for the Oscars.

Bartz talked about monetization and said a lot of other stuff, but got to the finances quickly.

“Search was a mixed bag,” she said flatly. You can say that again–but not in a good way.

Bartz tried to put a good-news spin on it, but had to admit that “on the downside [Microsoft's] adCenter is not seeing strong RPS,” she said.

That’s revenue per search and a key number that Yahoo had thought would be better by now.

Bartz noted that the paid search markets internationally will be delayed until MicroHoo gets its act together.

Good idea!

2:16 pm: CFO Tim Morse took over to go through the numbers.

“We had good display momentum around the globe,” he said.

But search was, um, bad. It underperformed, but Yahoo had that guarantee from Microsoft to pay out, which Morse called a “financial floor.”

Morse pretty much read the press release from here on out.

2:24 pm: Bartz was back talking up the huge audience Yahoo has abroad. And it is true–the Yahoo brand is a golden one globally.

Also video consumption is up too, as it is across the Web, in terms of views and time spent. Yahoo’s “Primetime in No Time” got 500 million streams in the quarter.

Bartz turned to mobile, which is weak no matter what she said about the laudable Livestand. It’s one of many in a very competitive market.

Same for social, which Yahoo has essentially abdicated to Facebook. That said, Yahoo has tried to weave social within its myriad of sites and it gets it, especially compared to the socially awkward Google.

Bartz summed up that she hoped everyone gets that profitability and revenue growth were on track to get better, promising more at the investor day in May.

2:30 pm: Q&A time!

The first question is about display growth. It’s a softball, since display was up.

The next is about other revenue growth areas to come.

Bartz–who seemed not so prepped for such an obvious question–ticked off shopping, travel and uuuuuh….

Morse jumped in and talked about making internal connections, which I also did not understand.

An analyst then wanted to “dig into” search problems. I’d say it’s time to call in Mike Mulligan and his steam shovel!

Relative to RPS, Bartz acknowledged it was low and everyone was studying the issue. There is a plan, apparently. Again, Bartz was maddeningly vague.

I missed the next question and then it was back to search.

Bartz was not getting too specific about search, but would say video advertising was going to do well.

She did note that Yahoo expected a dip in Q1 related to search revenue, “but the dip went a little lower than we expected and lasted a little longer than expected.”

Bartz said she had recently sat down with Microsoft execs to go over the problems. How much would I have liked to have been a fly on that wall!

The next question was about video and it turns out Bartz loves the babbling babies too! I knew we had something cool in common.

The next question is about Japan and the possible deal to sell off Yahoo’s ownership of Yahoo Japan!

Morse said diddly, except “we continue to make progress.”

A question about display and possible content verticals.

Verticals Yahoo is interested in, according to Bartz: Entertainment, lifestyle, women, gossip.

“The things people really want to do, they want to disappear,” said Bartz, which was an interesting way of putting it.

Yet another question in what was beginning to feel like an endless call.

It was about Right Media, Yahoo’s advertising exchange. Cleaning it up, etc.

The next question is about communications, as in email.

Bartz even sounded bored and messed up a few words. “I’ve had too many Diet Cokes,” she joked.

Personally, I am considering disappearing into some content, since there is yet another question.

It’s–no surprise–an RPS question!

Funky!

Search guarantee payments from Microsoft are in place for another four quarters. Thank goodness.

Bartz got more detailed about the problems. There is some kind of prediction issue, which she said Microsoft is working on.

Now a local advertising question and its relationship with Facebook.

Bartz grabbed this one by the horns, noting you don’t have to run to the social networking powerhouse to get you a social ad!

It’s about branding with a social component. Which would be, um, Facebook, which was part of Yahoo’s Chrysler campaign referenced by Bartz.

A question about daily deals.

It’s growing, but more at Groupon and LivingSocial, which Morse does not mention.

Finally, the last question.

Another gigantic softball on engagement and Yahoo’s new content platform and some mobile deets query about whether Yahoo can make it there.

Bartz said she was working on it. As to content, Bartz said stats show big lifts.

“The good news is that it’s all in the right direction,” she said.

Up would certainly be good.

Irony Alert: Microsoft Files Formal Complaint Against Google With EC

Kara Swisher — Thu, 31 Mar 2011 08:25:02 +0000

Microsoft’s legal eagle Brad Smith didn’t even bother to pretend the software giant’s filing of a formal antitrust complaint against Google with the European Commission wasn’t a wee bit ironic.

Wrote Smith in a blog post late last night:

“There of course will be some who will point out the irony in today’s filing. Having spent more than a decade wearing the shoe on the other foot with the European Commission, the filing of a formal antitrust complaint is not something we take lightly. This is the first time Microsoft Corporation has ever taken this step.”

But take it the company did, noting: “Microsoft is filing a formal complaint with the European Commission as part of the Commission’s ongoing investigation into whether Google has violated European competition law.”

Google, no surprise, disagreed, via a statement from a spokesman.

“We’re not surprised that Microsoft has done this, since one of their subsidiaries was one of the original complainants. For our part, we continue to discuss the case with the European Commission and we’re happy to explain to anyone how our business works.”

Here is the whole Microsoft post, in which Smith outlines Microsoft reasons for its action:

Adding our Voice to Concerns about Search in Europe

30 Mar 2011 9:00 PM

Posted by Brad Smith

Senior Vice President & General Counsel, Microsoft Corporation

Microsoft is filing a formal complaint with the European Commission as part of the Commission’s ongoing investigation into whether Google has violated European competition law. We thought it important to be transparent and provide some information on what we’re doing and why.

At the outset, we should be among the first to compliment Google for its genuine innovations, of which there have been many over the past decade. As the only viable search competitor to Google in the U.S. and much of Europe, we respect their engineering prowess and competitive drive. Google has done much to advance its laudable mission to “organize the world’s information,” but we’re concerned by a broadening pattern of conduct aimed at stopping anyone else from creating a competitive alternative.

We’ve therefore decided to join a large and growing number of companies registering their concerns about the European search market. By the European Commission’s own reckoning, Google has about 95 percent of the search market in Europe. This contrasts with the United States, where Microsoft serves about a quarter of Americans’ search needs either directly through Bing or through our partnership with Yahoo!.

At Microsoft we’ve shown that we’re prepared to work hard and invest literally billions of dollars annually to offer Bing, a search service that many now regard as the most innovative available. But, hard work and innovation need a fair and competitive marketplace in which to thrive, and twice the Department of Justice has intervened to thwart Google’s unlawful conduct from impeding fair competition. In 2008 the DOJ moved to file suit against Google for its unlawful attempt to tie up and set search advertising prices at Yahoo!, causing Google to back down. And last year the DOJ formally objected to Google’s efforts to monopolize book content, a position affirmed by a federal district court in New York just last week. Unfortunately, even this has not stopped the spread by Google of new and disconcerting practices in the United States.

As troubling as the situation is in United States, it is worse in Europe. That is why our filing today focuses on a pattern of actions that Google has taken to entrench its dominance in the markets for online search and search advertising to the detriment of European consumers.

How does it do this? Google has built its business on indexing and displaying snippets of other organizations’ Web content. It understands as well as anyone that search engines depend upon the openness of the Web in order to function properly, and it’s quick to complain when others undermine this. Unfortunately, Google has engaged in a broadening pattern of walling off access to content and data that competitors need to provide search results to consumers and to attract advertisers.

On PCs it is usually not difficult for people to navigate to any search engine. Google in fact makes this point virtually every time someone raises antitrust concerns about their practices. Their defense ignores the hugely important fact that there are many other important ways that search services compete. Search engines compete to index the Web as fully as possible so they can generate good search results, they compete to gain advertisers (the source of revenue in this business), and they compete to gain distribution of their search boxes through Web sites. Consumers will not benefit from clicking to alternative sites unless all search engines have a fair opportunity to compete in each of these areas.

Our filing details many instances where Google is impeding competition in these areas. A half-dozen examples below help illustrate some of our concerns.

First, in 2006 Google acquired YouTube–and since then it has put in place a growing number of technical measures to restrict competing search engines from properly accessing it for their search results. Without proper access to YouTube, Bing and other search engines cannot stand with Google on an equal footing in returning search results with links to YouTube videos and that, of course, drives more users away from competitors and to Google.

Second, in 2010 and again more recently, Google blocked Microsoft’s new Windows Phones from operating properly with YouTube. Google has enabled its own Android phones to access YouTube so that users can search for video categories, find favorites, see ratings, and so forth in the rich user interfaces offered by those phones. It’s done the same thing for the iPhones offered by Apple, which doesn’t offer a competing search service.

Unfortunately, Google has refused to allow Microsoft’s new Windows Phones to access this YouTube metadata in the same way that Android phones and iPhones do. As a result, Microsoft’s YouTube “app” on Windows Phones is basically just a browser displaying YouTube’s mobile Web site, without the rich functionality offered on competing phones. Microsoft is ready to release a high quality YouTube app for Windows Phone. We just need permission to access YouTube in the way that other phones already do, permission Google has refused to provide.

Third, Google is seeking to block access to content owned by book publishers. This was underscored in federal court in New York last week, in the decision involving Google’s effort to obtain exclusive and unfettered access to the large volume of so-called “orphan books–books for which no copyright holder can readily be found. Under Google’s plan only its search engine would be able to return search results from these books. As the federal court said in rejecting this plan, “Google’s ability to deny competitors the ability to search orphan books would further entrench Google’s market power in the online search market.” This is an important initial step under U.S. law, but it needs to be reinforced by similar positions in Europe and the rest of the world.

Fourth, Google is even restricting its customers’–namely, advertisers’–access to their own data. Advertisers input large amounts of data into Google’s ad servers in the course of managing their advertising campaigns. This data belongs to the advertisers: it reflects their decisions about their own business. But Google contractually prohibits advertisers from using their data in an interoperable way with other search advertising platforms, such as Microsoft’s adCenter.

This makes it much more costly for Google’s advertisers to run portions of their campaigns with any competitor, and thus less likely that they will do so. That is a significant problem because most advertisers figure that they have to advertise first with Google. If it’s too expensive to port their advertising campaign data to competing advertising platforms, many won’t do it. Competing search engines are left with less relevant ads, and less revenue. And while this restraint isn’t visible to consumers, its effects are nonetheless felt across the Web. Advertising revenue is the economic propellant fueling the billions of dollars needed for ongoing search investments. By reducing competitors’ ability to attract advertising revenue, this restriction strikes at the heart of a competitive market.

Fifth, this undermining of competition is reflected in concerns that go beyond Google’s control over content. One of the ways that search engines attract users is through distribution of search boxes through Web sites. Unfortunately, Google contractually blocks leading Web sites in Europe from distributing competing search boxes. It is obviously difficult for competing search engines to gain users when nearly every search box is powered by Google. Google’s exclusivity terms have even blocked Microsoft from distributing its Windows Live services, such as email and online document storage, through European telecommunications companies because these services are monetized through Bing search boxes.

Finally, we share the concerns expressed by many others that Google discriminates against would-be competitors by making it more costly for them to attain prominent placement for their advertisements. Microsoft has provided the Commission with a considerable body of expert analysis concerning how search engine algorithms work and the competitive significance of promoting or demoting various advertisements.

Over the past year, a growing number of advertisers, publishers, and consumers have expressed to us their concerns about the search market in Europe. They’ve urged us to share our knowledge of the search market with competition officials. As they’ve pointed out, the stakes are high for the European economy. On any given day, more than half of all Europeans use the Internet, and more than 90 percent of them look for information about goods and services on the Web. Indeed, the European Commission’s Digital Agenda made clear that commerce is moving online, where two-thirds of Europeans begin their shopping process. It’s therefore critical that search engines and online advertising move forward in an open, fair and competitive manner.

There of course will be some who will point out the irony in today’s filing. Having spent more than a decade wearing the shoe on the other foot with the European Commission, the filing of a formal antitrust complaint is not something we take lightly. This is the first time Microsoft Corporation has ever taken this step. More so than most, we recognize the importance of ensuring that competition laws remain balanced and that technology innovation moves forward.

We readily appreciate that Google should continue to have the freedom to innovate. But it shouldn’t be permitted to pursue practices that restrict others from innovating and offering competitive alternatives. That’s what it’s doing now. And that’s what we hope European officials will assess and ultimately decide to stop.

Please see this disclosure related to me and Google.

Bing Overlord Satya Nadella Promoted to President of Server and Tools at Microsoft

Kara Swisher — Wed, 09 Feb 2011 16:24:56 +0000

Satya Nadella (pictured here), the Microsoft exec who has been in charge of its Bing search effort, has been promoted to president of its Server and Tools Business.

He replaces Bob Muglia, a longtime exec who was ousted recently in CEO Steve Ballmer’s effort to shake things up at the company and stress the company’s technical expertise.

A 19-year Microsoft veteran, Nadella has most recently led the engineering efforts as an SVP in the Online Services Division, which includes Bing, the MSN portal and online advertising efforts.

“Nadella brings deep engineering and online services knowledge to $15 billion business,” said a Microsoft press release just issued.

In related news, Amitabh Srivastava, the SVP in the Server and Cloud Division who runs its Windows Azure cloud and Windows Server efforts, will leave the company. He was considered a leading internal candidate for the top job in the Server and Tools Business that Nadella got.

Both internal and external execs were eyed for the job, but it’s likely Nadella got it because of his early career in the server arena at Microsoft, as well as his experience running one of the biggest and most complex cloud efforts on the Web at Bing.

Indeed, though his efforts were costly and perhaps even futile, Nadella has had some success in innovating search for Microsoft with Bing, including delivering a well-regarded and quickly evolving product and improving market share.

He also was key in striking Microsoft’s advertising and search partnership with Yahoo.

He will have his hands full running the Server and Tools Business, which is critical to the company’s future and its cloud computing aspirations.

Microsoft said Nadella will be in charge of strategy, engineering, marketing and product development for Microsoft’s server, tools and cloud platform efforts.

“This includes developing the technology road map and vision to drive adoption of the company’s products, tools and services, and delivering the company’s next generation of cloud solutions for business customers,” Microsoft said.

Delivering such cloudtastic results will be a tall order, of course.

According to a recent post by New Enterprise’s Arik Hesseldahl:

“The Server and Tools Business is at $14.9 billion in annual revenue (fiscal 2010) Microsoft’s third largest division behind the Windows/Windows Live Division and and the Microsoft Business Division, both of which reported revenues north of $18 billion in 2010. On Muglia’s watch sales at STB grew more than 12 percent, and its operating margins went from 31 percent in 2008 to 37 percent in 2010. However, STB is nowhere near as profitable as the other two divisions: Business Division reported operating margins of 63 percent in 2010 while Windows saw 70 percent. Ballmer says in his memo that he’s eager to see stronger growth from STB.”

Here is the official press release, but more to come:

Microsoft Appoints Satya Nadella as President of Server and Tools Business

Nadella brings deep engineering and online services knowledge to $15 billion business.

REDMOND, Wash.–Feb. 9, 2011–Microsoft Corp. today promoted Senior Vice President Satya Nadella to president of Microsoft’s Server and Tools Business.

“We’re already making strong traction across our Server and Tools Business by embracing cloud services,” said Microsoft Chief Executive Officer Steve Ballmer. “Satya has deep experience in both our server business and online services, which will help accelerate our momentum while setting the course to deliver the cloud computing scenarios of the future.”

As president of the Server and Tools Business, Nadella will oversee the overall strategy, engineering, marketing and product development for Microsoft’s server, tools and cloud platform efforts. This includes developing the technology road map and vision to drive adoption of the company’s products, tools and services, and delivering the company’s next generation of cloud solutions for business customers.

“Our server and tools business is one of the fastest growing and most profitable businesses at Microsoft,” Nadella said. “I see great opportunity for Microsoft to grow the business and also lead the way in the transformation of enterprise IT. I’m excited to work with such a high-caliber team to chart the path for our continued success today and growth in the future.”

Nadella, 43, has been with the company for 19 years and most recently led the engineering efforts in the Online Services Division, which includes overseeing the technical strategy for one of the largest cloud infrastructures in the world, spanning the company’s Search, Portal and Advertising platforms.

Nadella joined the Online Services Division in April 2007, and was instrumental in leading the technical efforts for several critical milestones such as the launch of Bing, new releases of MSN, and the integration of Yahoo! across Bing and adCenter. Under his leadership, the Online Services Division has also built a strong engineering organization by attracting some of the most experienced technical minds from within Microsoft and across the industry.

Before joining the Online Services Division, Nadella led Microsoft Business Solutions, which focuses on the Microsoft Dynamics line of enterprise resource planning and customer relationship management products, and spent several years leading engineering efforts in Microsoft’s Server Group.

As announced in January 2011, Bob Muglia, previously president of the Server and Tools Business, will leave the company this summer. Muglia will work with Nadella as he transitions to his new role leading the Server and Tools Business.

Fist Pump! Microsoft Now Powers Yahoo Paid Search 100 Percent in U.S. and Canada

Kara Swisher — Wed, 27 Oct 2010 14:45:04 +0000

It’s not all executive musical chairs over there at Yahoo.

In fact, a lot of the real workers have been toiling away, and one new big result is that Microsoft’s adCenter is now officially powering 100 percent of paid search on the Silicon Valley Internet giant’s owned-and-operated properties and its publisher network in the U.S. and Canada.

According to the companies, that means marketers can now use one account for their search advertising campaigns across both the Microsoft Bing service and Yahoo.

Yahoo and Microsoft–which are attempting to combine their share of the search marketplace to better compete with behemoth Google via a partnership–have already completed algorithmic search integration.

In the U.S., that’s 163 million searchers on Yahoo and Microsoft, as well as 15 million searchers in Canada.

Thus, the pair are as tight as ticks–kind of like the JWoww and Snooki of search!

Time for a fist pump, Yahoo CEO Carol Bartz and Microsoft CEO Steve Ballmer!

“We’re very proud of this latest achievement with the search alliance which signifies a seminal step in Yahoo!’s search history,” said Chi-Chao Chang, Yahoo’s VP and GM for the global search business, in a statement. “Now that the back end work is done, Yahoo! will be able to focus on achieving the long-term goals of the alliance that will benefit consumers, advertisers and publishers alike.”

Liveblogging the Yahoo-Microsoft Search Deal Conference Call: The Carol and Steve Show Debuts!

Kara Swisher — Wed, 29 Jul 2009 12:32:17 +0000

BoomTown was so glad we had this time together with Yahoo (YHOO) CEO Carol Bartz and Microsoft (MSFT) CEO Steve Ballmer, just to have a laugh or sing a song about a major Web search and advertising deal.

I liveblogged the conference call, which I updated as it happened.

Did Ballmer scream and jump up and down? Did Carol say something naughty?

Or as the companies said:

SUNNYVALE, Calif. & REDMOND, Wash., Jul 29, 2009 (BUSINESS WIRE)–Yahoo! Inc. and Microsoft will host a conference call for accredited media and financial and industry analysts at 8:30 a.m. ET/5:30 a.m. PT today, July 29, 2009, to discuss the search agreement the companies recently announced. In addition, b-roll footage will be available. The satellite feed of b-roll footage will contain broadcast footage of remarks from Yahoo! CEO Carol Bartz and Microsoft CEO Steve Ballmer, as well as corporate Yahoo! and Microsoft b-roll footage.

B-roll? More like, were Bartz and Ballmer on a roll?

To find out, read on!

5:28 am PDT: It was EARLY on the West Coast and we were being forced at first to listen to really sleepy music like you might hear in a dentist’s office.

Zzzzzzzzz…

5:34 am PDT: Memo Impresario Eric Brown was late! But, as soon as he gets on, the new Yahoo PR head began with an enthusiastic hello about the deal.

Bartz was up first, followed by Ballmer. They were clearly together in the same place, likely in Silicon Valley at some bunker.

“This is a great day for Yahoo,” she said. “It’s a game-changer and I am glad to finally be able to talk to you about it.”

Her patter was clearly scripted, but Bartz was pretty jaunty in her delivery.

And sassy enough to make the first of many dings to former Yahoo savior Google (GOOG)–not by name, but as either “the market leader” or “the competitor.”

Why not just go right to calling the search giant this deal is aimed at battling what Bartz really meant: The Borg.

Bartz stressed that this deal only covers search and the search ad business and not, say, display advertising.

And, she added, while Microsoft’s AdCenter technology will power the money-making, “search will continue to be an integral part of the Yahoo consumer experience.”

Boiling it down, Bartz said: “What this deal is really about for everyone is scale.”

Cue the next Google dig: “The combination of Microsoft and Yahoo search puts the choice back into the hands of consumers, increasingly concerned about the influence of a single player.”

Single player=Darth Vader.

5:40 am PDT: Ballmer was next. “I am so delighted to see [the deal] come to fruition,” he said.

He does not say much more except that he hoped it would “flourish and come to life over the many years.”

Ballmer sounded like someone speaking at a ribbon cutting of a copy store at the mall.

The livelier Bartz came back on, discussing the terms, hewing pretty much to what was already in the press release.

Microsoft’s AdCenter as technology. Integration. 10 years. No display deal. Separate user experience.

Now to the bucks, as Bartz noted, they add $500 million to Yahoo’s operating income, save $200 million in capital expenditures and improve annual operating cash flow by $275 million.

“At its full implementation,” she added. There is always a catch!

Bartz said Yahoo would use the money to invest in its other properties, although she was not specific.

Then, it was onto regulatory issues and getting this party started.

Bartz put on the brakes. “This deal will not happen overnight,” she said.

Actually, not even close. She predicted a closing in early 2010 and it being rolled out over the following three to six months.

Finally, Bartz thanked the tireless teams who did the deal. “With a lot of help from Steve and I,” she said and then quipped, “not always so.”

She and Ballmer were now sounding like a hip mom and dad.

5:45 am PDT: Question time!

The first one was about why the pair did not do a display deal and also how they were going to bridge the huge gap in how much each made per search compared to each other and Google.

Bartz said that the point was to keep the deal idiot-proof. “Frankly, we wanted it as straightforward and simple as possible,” she said.

Ballmer concurred: “We are taking a big bite here.”

As to the earnings gap in search, he said, “The deal in and of itself will let us close gap with the market leader.”

Ballmer tried not to say the word “Google,” but stumbled and did anyway.

The next question was about Bartz’s shift from her “boatloads of cash” quote–which she said, in an interview with me at the seventh D: All Things Digital conference in late May, was a must for a deal with Microsoft–to her new “boatloads of value.”

Simple, she said, trying to gloss it over–Yahoo did not need a big cash payment up front (and it did not get it either).

“As far as we are concerned, the boatload of cash is us preserving our revenue line,” said Bartz.

The next question was about what Microsoft gets out of this deal.

“We clearly see an upside as execution really builds,” said Ballmer.

After more money questions, there is finally one on regulator issues.

Back to Google-bashing from Ballmer.

“I suspect the competitor who may not like more competition is Google,” he said.

Microsoft General Counsel Brad Smith then jumped in and talked about working together and filings in D.C. and making the case.

He said he “looks forward to the debate,” which is just what a lawyer would say.

5:58 am PDT: Finally, the layoff question.

Bartz is clear here. Some Yahoo search employees will be dragooned over to Microsoft, some will move to other parts of Yahoo and some will be let go.

“Unfortunately, there are some redundancies,” said Bartz.

More financial questions, one on the mobile search market, one on innovation, one on scale and one on advertisers.

“Advertisers, especially smaller ones, want to make sure there is enough meaningful market for them and they don’t want to learn three platforms,” said Bartz. “They know how to enter into the Google system.”

She said “Google system” like she was talking about a gulag.

Meanwhile, Ballmer talked about how good it was to now be No. 2. Really, he did, since he was a distant No. 3 before this deal.

6:11 am PDT: Some technology question. Ballmer noted that the deal was not a “rip and replace” of Yahoo’s search for Microsoft. It will be an “integration.”

Next was a question about how this deal measured up to last year’s more money-laden offer by Microsoft.

Bartz said she didn’t just want an upfront payment, but a “true partnership,” with control over the Yahoo user interface and “real skin in the game.”

Ballmer called last year’s deal more investor-focused than operational. “The deal was different for Microsoft, not better,” he said, leaving out the cheaper part.

Finally, I get called on, and ask about who will lead the integration and how it will get done, so as not to create a huge distraction.

Bartz said it would be a “smooth transition…not that different from when Yahoo went from Overture to Panama.”

I did not have the heart to tell her that the transition of the Yahoo ad platform was anything but smooth and one of the reasons Yahoo got into the trouble it has gotten in.

Ballmer noted that the leadership that put together the deal is the leadership of the companies in the digital arena.

I also asked how the deal finally came together, especially after such historical rancor.

“It was like a snowball down a hill,” said Bartz.

But it was also a complex ball of ice, she added, noting “it was not a two-page term sheet.”

More like hundreds of pages. “There was not a high level of abstraction,” said Ballmer.

Finally, finding a kind of married groove–from that time before the random bickering sets in–Bartz noted that “dating is one thing, but having a partnership is another.”

She added: “The good news once we reached a point we believed to be advantageous, [we did a deal]…that’s how partnerships work.”

Well, exactly how it all works out, of course, still remains to be seen.

Before Yahoo-Microsoft Deal Terms Are Unveiled, Let's Go to the Videotape From the Last One

Kara Swisher — Wed, 29 Jul 2009 01:02:05 +0000

As BoomTown reported earlier today, Yahoo and Microsoft have struck a search and online advertising partnership that sources said will be announced tomorrow.

But it is eminently instructive to look at the deal that Microsoft had offered Yahoo almost exactly a year ago, which was rejected in favor of a competing bid by fellow Silicon Valley Web rival Google (GOOG).

The Yahoogle deal, of course, failed, after regulators looked askance at a partnership of the No. 1 and No. 2 search players.

The new deal between Yahoo (YHOO) and Microsoft (MSFT), according to sources, certainly seems a lot smaller than the one offered last June, although there might be a surprise yet to come.

But so far, according to sources, there will be no upfront payment to Yahoo, with the focus on a revenue share between the two companies, as had been expected after Yahoo CEO Carol Bartz said she was looking for “boatloads of money” in any deal with Microsoft.

That might not be as forthcoming, since sources also said Yahoo would still sell search ads on its sites and Microsoft’s too, although Microsoft’s AdCenter advertising sales technology will be underneath it.

Doing its own search ads means the cost savings to Yahoo will be less than previously estimated, but it also solves its longstanding issues about control of relationships with advertisers and also of consumer data.

This makes the deal much less significant than ones previously envisioned, which included Microsoft taking over both Yahoo’s search and its text-based search advertising businesses in exchange for large payments and guaranteed revenue.

As it is, according to those familiar with the deal, the software giant still is getting an important coup, since its Bing search technology will be used on Yahoo sites. And Yahoo will be able to focus and innovate better on its strengths, which are in advertising and content.

Whatever is unveiled, there might be goodies yet to come, some of which might be similar to what Yahoo was previously offered by Microsoft.

As I wrote in June 2008:

Well, according to people familiar with Microsoft’s thinking, the goody bag Yahoo turned down was considered by the company to be substantial.

It included, according to Microsoft sources:

A cash offer of $1 billion for all of Yahoo’s search assets, including its paid and algorithmic search. But Yahoo would also be allowed to innovate in new arenas, like visual search. (This low bid was, most agree, kind of a direct insult to Yahoo techies.)

A commercial deal to serve Yahoo’s search and search-ad business with a guaranteed economic return that was higher than what Yahoo currently earns with its Panama system.

An offer to buy up to $8 billion of Yahoo stock for $35 a share from investors like Carl Icahn and others.

A guarantee to allow Yahoo to keep all data collected from search and search ads, in order to help its display ad business.

Overall, sources said that Microsoft estimated that the deal would improve Yahoo’s operating income by $1 billion.

The smaller Google deal has a lot less in terms of bells and whistles, but allows Yahoo to keep its search business intact.

Microsoft sources say execs were stymied by Yahoo, which offered to sell the entire company to Microsoft up until three days ago.

But, as Yahoo has even said, Microsoft remained steadfast in its lack of interest in a bigger deal, after it walked away a month ago from its botched takeover attempt.

And it is still not interested, even with the pressure a Yahoo-Google partnership now presents.

“Yahoo might still dream of a big deal and hope they can win this game of chicken by doing this deal with Google,” said one person familiar with Microsoft’s thinking, about the possibility of Microsoft now making another offer. “But the big deal is done.”

Even if Yahoo’s stock declines even more precipitously? “It’s no longer a price issue with Microsoft,” said the source. “The company has moved on.”

The source, like many, predicted intense regulatory opposition to the Yahoo-Google hookup from the software giant now.

No kidding!

“It’s war,” said another source. War is a nice way of putting it.

After all that, it finally looks like it’s peace–the terms of which will likely be highly scrutinized in the days ahead.

Microsoft-Yahoo Deal Struck–Will Be Announced Within Next 24 Hours

Kara Swisher — Tue, 28 Jul 2009 22:27:27 +0000

Multiple sources close to the situation said that the online search and advertising deal between Microsoft and Yahoo has been struck and will be announced within the next 24 hours.

While it is not clear if the actual papers have been inked or approved by the boards of the two companies, sources said it was a formality and that negotiations are complete on a deal that is less sweeping than originally conceived.

In any case, making any partnership is likely to be the cause of much relief at both companies, since they have been trying–without success–to join together to mount a better offense in the sector against the dominant Google (GOOG).

According to sources, as had been previously reported by Advertising Age, there will be no upfront payment to Yahoo, with the focus on a revenue share between the two companies.

Sources said Microsoft search technology will be used on Yahoo sites, although it is not clear if it will be branded as “powered by Bing”–Microsoft’s handsome and innovative new search offering–or not.

In addition, sources said Yahoo would still sell search ads on its sites and on Bing too, although Microsoft’s AdCenter advertising sales technology will be underneath it.

(Panama, we hardly knew ye!)

This makes the deal much smaller than ones previously envisioned, which included Microsoft taking over both Yahoo’s search and its text-based search advertising businesses in exchange for large payments and guaranteed revenue.

Previous discussions also considered Yahoo selling display advertising for Microsoft’s MSN consumer sites.

Still, once in place, it is a significant deal in the Internet arena, bringing together two of its most powerful players in an unusual alliance that has been long in coming.

“After three years of trying, it looks like it finally stuck,” joked one person familiar with the situation about the Silicon Valley icon and the Redmond, Wash., software behemoth finally joining together.

And, in fact, Yahoo (YHOO) and Microsoft (MSFT) have been engaged in talks about a variety of partnerships over the years, as well as in a hostile takeover struggle that soured their relationship badly.

But, under new Yahoo CEO Carol Bartz, the companies have re-engaged in recent months, discussing a deal to share search and online advertising technology.

A spokesman for Microsoft declined to comment, as did a spokeswoman for Yahoo (even though BoomTown asked: “Pretty please?”)

The Wall Street Journal just posted a similar story on the deal coming to fruition, as did Advertising Age.

Both posts noted that Yahoo and Microsoft were concerned about regulatory approval, although with Google’s share at close to 70 percent in the search market, it would be hard to argue that their union hinders competition.

Together, Yahoo and Microsoft’s share is about 30 percent.

A search and advertising partnership between Yahoo and Google failed to gain regulatory approval last year–and thank goodness for that!

Yahoo and Microsoft will likely try to paint this one as a counter to Google’s power and hope such an argument will be supported by advertisers, who have long wanted a stronger second-place competitor to Google.

Your Facebook Status Says You're Craving Coffee. Click Here to Find a Starbucks Near You!

John Paczkowski — Tue, 30 Oct 2007 07:01:07 +0000

We really need to move the thinking about the social graph. This exists out in the world, and has always existed. We didn’t invent it. How can we ‘own’ it? We’re just trying to map it out. We have a model of the social graph that we’re constructing.”
–Facebook CEO Mark Zuckerberg

We have address books, and the sum of the address books is the social graph.”
–Google CEO Eric Schmidt

Turns out that the “social graph” about which Facebook CEO Mark Zuckerberg so often speaks these days isn’t just a decades-old computer science term, it’s the basis for the monetization platform that will someday justify Facebook’s $15 billion valuation. Or so the theory goes.

On Nov. 6, Facebook will make a major announcement at the ad:tech conference in New York. And ad-industry executives familiar with the company’s plans say it will revolve around an advertising network reportedly called SocialAds. As described in Facebook’s Sept. 24 trademark filing of the term, SocialAds are “advertising and information distribution services, namely, providing advertising space via the global computer network; promoting the goods and services of others over the Internet.”

But–again according to those faceless ad-industry executives–the SocialAds network may be quite a bit more than that. It might use permission-based demographic targeting to deliver ads to users on Facebook–and off, says Altura Ventures’ Lee Lorenzen, who offers this hypothetical breakdown of the service:

Facebook (with Microsoft’s help) will offer a competitive solution to Google AdSense for non-Facebook Web sites.
You can think of this service as an open-source AdSense solution where Google can provide ads into it (if they document what the Web site owner will earn) but Google (and any other ad providers) will have to compete with ads that Microsoft can provide that are Facebook-enhanced.
The innovation here is that Microsoft’s ads will be able to pick up the user’s Facebook cookie (for the 50-million-growing-to- 200-million users who already have a cookied-Facebook account).
This means advertisers in Microsoft’s adCenter can offer a much higher CPC or CPM payment to the Web publisher because they will know that the user viewing the Web page is actually a Facebook user that, for example, happens to be an 18-year-old male with a birthday in three weeks who mentioned Xbox on his profile page.

If Lorenzen’s right, SocialAds might easily justify Microsoft’s $240 million investment in Facebook.

Your Facebook Status Says You're Craving Coffee. Click Here to Find a Starbucks Near You!

John Paczkowski — Tue, 30 Oct 2007 07:01:07 +0000

We really need to move the thinking about the social graph. This exists out in the world, and has always existed. We didn’t invent it. How can we ‘own’ it? We’re just trying to map it out. We have a model of the social graph that we’re constructing.”
–Facebook CEO Mark Zuckerberg

We have address books, and the sum of the address books is the social graph.”
–Google CEO Eric Schmidt

Facebook (with Microsoft’s help) will offer a competitive solution to Google AdSense for non-Facebook Web sites.
You can think of this service as an open-source AdSense solution where Google can provide ads into it (if they document what the Web site owner will earn) but Google (and any other ad providers) will have to compete with ads that Microsoft can provide that are Facebook-enhanced.
The innovation here is that Microsoft’s ads will be able to pick up the user’s Facebook cookie (for the 50-million-growing-to- 200-million users who already have a cookied-Facebook account).
This means advertisers in Microsoft’s adCenter can offer a much higher CPC or CPM payment to the Web publisher because they will know that the user viewing the Web page is actually a Facebook user that, for example, happens to be an 18-year-old male with a birthday in three weeks who mentioned Xbox on his profile page.

If Lorenzen’s right, SocialAds might easily justify Microsoft’s $240 million investment in Facebook.