Error Forum Blog

Microsoft Corp. recently announced the largest purchase the software giant has ever made, paying $6 billion for aQuantive Inc., a leading agency for Internet ads which also has powerful technology that serves banner ads to other Web sites. The deal was an all-cash purchase for a price of $66.50 per-share which represents an 85% premium to aQuantive’s Thursday closing price of $35.87.

“The announcement represents the next step in the evolution of our ad network from our initial investment in MSN, to the broader Microsoft network including Xbox Live, Windows Live and Office Live, and now to the full capacity of the Internet. Microsoft is intensely committed to creating a thriving advertising business and to partnering closely with all key constituencies in this industry to help maximize the digital advertising opportunity for all.â€? said Steve Ballmer, chief executive officer of Microsoft.
Through the acquisition of aQuantive Microsoft hopes to boost its own efforts to sell and deliver advertising on the Internet, a business with an expected growth of 30% this year. Last month, Yahoo Inc. bought the rest of privately held online ad exchange Right Media Inc. that it didn’t already own for $680 million, and back in mid-April Google purchased DoubleClick Inc. for $3.1 billion, Microsoft clearly had to make a move if it wanted a piece of the online advertising business.

Microsoft said Wednesday that it would take a small equity stake in CareerBuilder, a popular job recruitment site operated by three big media companies. The deal deepens an existing partnership in a lucrative category of online classified advertising.Officials at CareerBuilder and the Tribune Company, one of the current owners, put the stake at 4 percent, though neither they nor Microsoft would disclose the amount invested. The site’s other owners are the Gannett Company and the McClatchy Company.

Under the deal, CareerBuilder will continue to be the exclusive job search engine on Microsoft’s MSN site through 2013, and will pay Microsoft up to $443 million. The exact amount paid by CareerBuilder will depend on how much traffic MSN drives to the site, the companies said.

Since the partnership with Microsoft began in January 2004, traffic at CareerBuilder has grown from about 10 million visitors a month to more than 21 million, the companies said.

“It has been a great relationship for us,� said Steve Berkowitz, senior vice president for online services at Microsoft.

Mr. Berkowitz said Microsoft’s equity investment in CareerBuilder was intended to ensure that Microsoft would share in any future value created by the partnership.

“It says we’re in this for the long haul,� he said. The new alliance will help CareerBuilder with a planned international expansion, he said.

CareerBuilder competes directly with other employment sites like Monster.com and HotJobs on Yahoo, which itself has a partnership with a consortium representing more than 260 newspaper Web sites.

The deal potentially heightens the rivalry between MSN and Yahoo, two of the leading Internet portals, which compete to attract users with news and entertainment content, as well as e-mail, instant messaging and other offerings. Yahoo recently announced a deal with publishers representing 264 newspapers, including McClatchy, to sell national advertising across their Web sites.

Despite the rivalry, Yahoo and Microsoft executives came together here on Wednesday amid high expectations that the companies might announce some kind of partnership.

But as Terry S. Semel, chief executive of Yahoo, addressed representatives of hundreds of marketers and advertising agencies at a conference convened by Microsoft, and later sat down for an onstage conversation with Joanne K. Bradford, chief media officer for MSN, there was not a single reference to a possible deal.

Instead, the talk was all about the forces that are shaping the online advertising industry: international expansion, mobile devices and interactive video.

Mr. Semel did make the obligatory dig at Google, which is outflanking both Microsoft and Yahoo in online advertising.

Referring to the video-sharing site acquired last year by Google, Mr. Semel said that either Microsoft or Yahoo could have chosen to build “YouTube look-alike� sites that disregarded copyrights. Instead, he said, both companies chose to be partners with Hollywood studios and television networks.

Unlike many of the other speakers at the two-day event, Mr. Semel took no questions from the audience.

Yahoo Closing Auction Service

SAN FRANCISCO, May 9 (AP) — Yahoo will close its online auction service for North America next month, signaling its intention to focus on more profitable endeavors.

The company’s auctions in the United States and Canada, begun nine years ago, will end June 16, although some tools will remain accessible until Oct. 29. The move will not affect its auction services in Hong Kong, Singapore and Taiwan.

Since neither Yahoo! Inc. (NASDAQ: YHOO) or Microsoft Corp. (NASDAQ: MSFT) seems to be hurting Google Inc.’s (NASDAQ: GOOG) online advertising business, reports have bubbling up (again) that the companies would merge. While that may not happen, a partnership between the two companies is probably underway (and under wraps) as these two juggernauts scheme to soak in some of the revenue Google is single-handedly enjoying right now.

On that note, Yahoo! CEO, Terry Semel, will be present during the Microsoft Strategic Account Summit meeting that happens every year. Generally, Microsoft and Yahoo! are mortal enemies when it comes to competing for online ad dollars. However, the two are becoming more cozy with each other from all those late-night strategy meetings where both are contemplating how to best attack Google.

Yahoo!’s Semel was booked for the Microsoft Summit long before word got out last week that Microsoft’s acquisition talks with Yahoo! again fluttered away. What Semel will talk about in the face of a current and large rival is a multi-pronged partnership (something Yahoo! loves to do these days) aimed at raking in some ad dollars from Google’s grasp.

Both companies need to be able to turn search queries into cash, but both aren’t nearly adept at it as Google is — nor do both companies have the market share Google has. Can a partnership turn that around? The partnership will have to surpass Google’s search numbers (no easy task) and then monetize it as effectively as Google does. Are you betting on that scenario? I’m not sure I am — yet.

As it rolled out its revamped Windows Live Hotmail this week, Microsoft also promised it would deliver replacements for the Outlook Express and Windows Mail desktop clients along with new software to integrate web mail with the corporate Outlook program. Windows Live Mail will replace Outlook Express on Windows XP and Windows Mail on Vista in “the coming weeks,” says Microsoft. The program, which will handle POP, IMAP and Windows Live Hotmail accounts, was characterised as a faster, more robust version of Windows Live Mail desktop beta, which has been in testing for Windows XP. The beta will be retired.

According to a Windows Live Mail blog, the new client will sport features from Outlook Express, Windows Mail and the Windows Live Mail desktop beta. A redesigned interface supports Vista’s Aero look and feel — the first Windows Live offering to do so — and the program adds S/MIME and LDAP support. It will be advertisement-free.

Also due in the next few weeks, says Microsoft, is an updated Outlook Connector, software that synchronises messages, address books, tasks and calendars between Windows Live Hotmail and Outlook 2003 and Outlook 2007. An earlier edition of the Connector was launched by Microsoft last November.

Swapping in the Windows Live Mail client for Vista’s Windows Mail might surprise Vista users, since the operating system has been out less than four months.

Microsoft Patch Tuesday: May 2007

Why is Microsoft (MSFT) struggling so badly in the search wars with Google and Yahoo? Perhaps one factor is its hypercensorious advertising software.A Business 2.0 Beta tipster reports that seemingly innocuous terms like “startup team” and “board of advisors”  are getting rejected by AdCenter, MIcrosoft’s answer to Google’s (GOOG) AdWords and Yahoo’s (YHOO) Panama.

Microsoft’s published advertising guidelines, which forbid things like firearms and hate speech, shed no light on the subject. Unless, perhaps, Redmond now views startups as dangerous weapons, hateful things which have no right to advertise on its search pages.

I’ve asked Microsoft why those words have been banned, and am waiting to hear back. But for now, I’m taking it as a sign of the general disarray in Microsoft’s Web efforts - hastily built, shoddily constructed software that randomly annoys its users. No wonder Microsoft has been falling behind. Yet another reason why Bill Gates & Co. should surrender gracefully and hand their ad operations over to Yahoo.

Update: Microsoft PR has gotten back to me with an utterly nonresponsive response: “Unfortunately, we do not have any information to provide at this time. We apologize for this inconvenience.  Thank you for your
understanding.” Sorry, Microsoft, I don’t understand - and neither do your customers.
Source:http://blogs.business2.com/beta/2007/05/microsofts_bann.html

But the reason the companies would want to join forces — Google’s continued dominance in online advertising revenue and in Web-based services in general — remains as strong as ever. And it raises questions about what Microsoft’s next move will be to generate a healthy online advertising business and avoid losing even more ground to the flourishing search company. There are many reasons why a Microsoft-Yahoo deal would have been a bad idea, and some in the industry are breathing a sigh of relief that they won’t have to deal with the complexity it would have wrought. Critics questioned how the two companies would navigate separate ad platforms and network infrastructures as well as how they would integrate their disparate corporate cultures. They also said the full union of the companies would take at least two years to complete, giving Google even more time to solidify its leading market position. Wall Street analysts also noted it would be a bad idea for Microsoft to undertake such an enormous merger when the company has traditionally made smaller, more strategic acquisitions. A research note by analyst Heather Bellini at UBS advised the company to tackle its online technology challenges on its own while acquiring more customers by buying startups and other small companies. However, she also noted that there aren’t a lot of valuable Internet assets on the market now that Google has snapped up Doubleclick, a deal that is expected to close by the end of the year. So what’s a software company that waited too long to capitalize on the new business model of the Internet to do now? Microsoft is in dire straits in the online advertising market, and the company has to change tactics before it becomes too late to even be a serious contender, let alone the revenue leader, as Microsoft CEO Steve Ballmer has promised. Leveraging its skyrocketing revenue and profits, Google has diversified its line of products and services, moving into areas outside of consumer online services, such as offline advertising, hosted software for businesses, and enterprise search. Within consumer online services, it has also expanded beyond Internet search, developing a broad menu of products in such areas as photo management, Web mail, video, and instant messaging. Microsoft, on the other hand, has failed to promote its Windows Live branded services since it launched a major revamp and branding plan in November 2005. Moreover, the company has seen revenues in its Online Services Group rise only slightly since that time and has made new and improved services languish in beta testing only for select users before making them publicly available. This runs counter to the strategy of Google, which pushes out services to users in rapid-fire fashion even if they remain in beta for years. Microsoft also has had a hard time marketing its Office Live hosted service, which provides a Web presence, CRM, e-mail, and other hosted services to small businesses. Some industry watchers said there still are ways other than merger for Microsoft and Yahoo — or Microsoft and another competitor — to team up against Google. One financial analyst who asked not to be named suggested that Microsoft and Yahoo broaden an ad-revenue sharing deal they already have. It lets Microsoft use the Yahoo Search Marketing platform, formerly called Overture, in overseas markets to provide paid search listings to Microsoft’s MSN and affiliates. Microsoft would not disclose the terms of the revenue-sharing deal, but essentially Microsoft pays Yahoo to push out ads to some of its sites and in turn earns advertising revenue. Eventually, markets currently served by Yahoo’s search platform will be powered by Microsoft’s adCenter platform, which is already handling Microsoft’s paid search advertising in the U.S., U.K., France, Singapore, and China. Andrew Brust, chief of new technology for consulting firm Twentysix New York, offered another plan for Microsoft, of which his company is a partner. He thinks it would be a good idea for Microsoft to cozy up to multimedia content providers like AOL and News Corp., which owns both the Fox media empire and the popular social networking site MySpace.com, to earn more advertising revenue. A deal with Myspace.com would be an especially smart move because it would give Microsoft “an ‘it’ presence it is far short of right now,” he said.One stumbling block to any online acquisition or partnership is Microsoft itself, Brust said. “I’m still not convinced they really want this,” he said. “Rather, I think that they think they have to have it, and so their approach is too reactive.” Michael Gartenberg, vice president and research director at Jupiter Research, suggested that rather than acquire or partner another company to gain ground on Google, Microsoft should turn inward and focus on execution of its own online strategy. The company has developed innovative online services behind the scenes but has been slow getting those out to users, he said. “One of the challenges at Microsoft is how to get the technology out the door,” Gartenberg said. “Look at how long the Hotmail upgrade (launched globally Monday) was in beta. Part of what Microsoft has to do is execute … [and] deliver on things that it may already have in the back room.” Microsoft in January 2006 launched Windows Live Labs as a way to develop new online technologies and services quickly so it can push out offerings the way Google does. However, the group has delivered only a few services since its creation. Juan Carlos Perez in Miami contributed to this story. Source:With Yahoo deal off, what next for Microsoft? | InfoWorld | News | 2007-05-08 | By Elizabeth Montalbano, IDG News Service

Source:http://www.errorforum.com/microsoft/19565-yahoo-deal-off-what-next-microsoft.html#post24600

Microsoft is set to launch a blistering attack on rival Google on Tuesday for what the software giant argues is the Web search leader’s “cavalier” approach to copyright protection.