Microhoo Deal Dead

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Over 3 months after making a $44.6 billion bid for Yahoo, Microsoft has decided that 'clearly a deal is not to be done'. Microsoft's latest bid which upped the total price to $47.5 billion over the weekend, was rejected as inadequate.

So what does that mean? For one, it means I was wrong to expect that a 80% premium would be enough to convince Yahoo. And more importantly, it may mean that both sides didn't want to do the deal - which may be a good thing. Both sides have had over 3 months to get feedback from analysts, employees and even competitors as to the value of the merger, and if the point was to take on Google - they may have both figured out that this might have been a disaster.

From an online advertising standpoint, it will mean:

• Google will get even stronger, especially in the short term
  
• Yahoo might get better and be willing to change dramatically because of the scrutiny
  
• Microsoft will have to grow this part of their business themselves, and get better at it.

For us and advertisers, I think this will mean we will have a more vibrant search engine marketing and online advertising industry. More competition usually means more innovation, choices and lower pricing. It will take some time to get there and it may hurt these industry giants but in the longer term, the rest of us should benefit.

One thing is certain. Online advertising and marketing is BIG, and getting bigger. If you haven't already, hitch your wagon to it.

Labels: deal, Microsoft, online advertising, yahoo

posted by Fred @ 5:05 PM

Microsoft Buying Yahoo

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Well, it's finally happened. After a big dip in the markets, and Yahoo ready to layoff 1,000 employees, Microsoft made its move and offered $44.6 billion for Yahoo. That's Microsoft biggest bet yet, that the Internet advertising business is a large part of their future. Remember they spent $6 billion not long ago to buy Aquantive. So just those two now represent a $50 billion investment in online ads, search engine marketing and online marketing by MS.

You're probably thinking that this is a bid, not a done deal, which it is. I'm talking like it's a done deal because it will be - there is no way that the shareholders will turn this premium done, and there is no one else out there (save Google), who can beat this bid. And the anti-trust hurdles aren't there, because it's Google that needs to worry about that nowadays, rather than MS.

So what does this mean? Well for one, MS has finally admitted that they can't build a significant enough search and online ad business, because they are a band of techies who build software. And Yahoo, who is floundering because they depended more on display ads and portal content (like a media company), needs more Goog-like technical savvy. Does this mean it will work to catch Google? Only time will tell for sure, but I for one don't think so. The culture and mentality is too different. Googles need to be built by tech guys who ALL know they are in the advertising and media business.

Certainly Microsoft and Yahoo will both continue to do reasonably well, given the growth in online ads, search engine marketing and online media. But as for knocking down the big dog in this space - no.

I am hopeful that the combination will make the industry more competitive. Online ad pricing is starting to get expensive, and less effective. More competition will keep innovation up and costs down.

Labels: consolidation, Google, Microsoft, online advertising, yahoo

posted by Fred @ 9:27 AM

30% Increase in Online Ad Spend Expected from Local Search and Online Video

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According to a forecast from ZenithOptimedia, marketers should expect to see a 30% increase in online ad spend in local search and video. This will help online advertising go over $33 billion next year. And by 2009 online ad spending will account for almost 10% of total ad spend worldwide.

While this is going on, they predict that newspaper ad spend will decline by 29%, with magazines and radio declining as well. Only TV and outdoor advertising will have small increases in the traditional marketing side.

This doesn't go near as far as what Steve Ballmer at Microsoft was quoted recently as saying. He stated that sometime in the next decade, all advertising will be digital. He's predicting that as much as 25% of Microsoft's revenue will come from advertising, and likely with ad-supported Microsoft products.

30% per year is a big number. That means, the spending will double every 2.1 years, which means maybe Microsoft isn't so crazy after all. We use online ads, in addition to helping people use it, and we can honestly say it is by far the lowest cost, most effective medium that our clients use. If you haven't tried it, you'd better, or you might be using a horse and buggy when everyone else is using a new fangled horseless carriage known as the automobile.

Labels: ad-supported, digital advertising, Microsoft, online advertising

posted by Fred @ 6:15 PM

Bill Gates Says Future of Advertising is Online

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This week, Microsoft Chairman , Bill Gates stated that he will spend the remainder of his employment at Microsoft, focused on advertising and marketing services.

Speaking at Microsoft's annual Strategic Account Summit, Bill Gates said that his main focus before he left his full-time position would be on 'search, buyers and sellers'. While that will only be about a year since he is leaving in mid-2008, his comment, 'That will be my biggest thing', is fairly telling.

'We're saying newspapers will go online, and there will be massive innovation that comes out of that,' he said 'We're saying that TV, the biggest ad market in the world, will completely go online and have the kind of targeting interaction that you only get out on the Web today.'

According to BizReport, the shift to online, with its associated lower costs and enhanced user experience will, Gates said, contribute to the shift of advertising online over the next five years and beyond.

This is important announcement in the online marketing world. First, he is predicting Microsoft's future, and the future is online advertising, particularly search. Not a small change, considering their business has been primarily Windows and Office. And secondly, he is admitting that their future is to catch up to Google.

In my opinion, this is a watershed moment - and one that may define the future of the Internet. Microsoft has $50 billion cash in the bank to make the shift.

Labels: Bill Gates, Microsoft, online advertising, online marketing

posted by Fred @ 11:32 PM