Yahoo under intense Icahn pressure

Jerry Yang is going to have a lousy summer. Carl Icahn, the New York-based corporate raider is willing to force the sale of the company before its annual meeting on August 1. In a stern letter sent June 6 to Yahoo chairman Roy Bostock, Icahn outlined his plan in pretty clear terms:

“– First, I would work to have the board replace your “poison pill” severance plan with an acceptable alternative. [Carl Icahn is referring to a severance plan for employees leaving or fired in the wake of the merger, that raises substantially the price of the transaction, among other things] – Second, I intend to ask our new board to hire a talented and experienced CEO (attempting to replicate Google’s success with Eric Schmidt) to replace Jerry Yang and return Jerry to his role as “Chief Yahoo”. Indeed, it was much speculated that Jerry would serve in the CEO role temporarily until a permanent CEO was hired after the board asked Terry Semel to resign.
– Third, I intend to ask our new board to inform Microsoft that unless any alternative transaction can insure a $33 or higher stock price (of which I am skeptical) all talks of alternative transactions are over.
– Fourth, I will ask our new board to offer publicly to sell Yahoo! to Microsoft in a friendly and cooperative transaction.
– Fifth, to the extent Microsoft does not want to make a proposal, I will ask our new board do a deal on search with Google, but only if it contains termination provisions that would in no way impede a subsequent acquisition by Microsoft.”

Carl Icahn is urging Yahoo to sell itself to Microsoft for $49.5bn, about $2bn more that Microsoft last, proposal.

Steve Ballmer sees the end of media paper within 10 years

Asked about his outlook for the future of media by the Washington Post, Microsoft CEO Steve Ballmer answered this: “In the next 10 years, the whole world of media, communications and advertising are going to be turned upside down — my opinion. Here are the premises I have. Number one, there will be no media consumption left in 10 years that is not delivered over an IP network. There will be no newspapers, no magazines that are delivered in paper form. Everything gets delivered in an electronic form.”

Well, this take is actually pretty reassuring considering the litany of things where Microsoft was dead wrong. Bill Gates was right in two instances (big ones for sure): Windows and Office. On all the rest, it essentially missed the boat: most of the Internet positions — both PC and mobile based — were left to other players. And today, what remains of Microsoft domination is seriously challenged by “cloud” hosted applications. Guess who has the biggest chances to be gone within ten years? By the way, hearing the cling-clung noise of forks and knifes, this semi-amateurish video of Ballmer was taken by a Washington Post staffer. Actually, 185 of them have been trained to use the medium, as explains Chet Rhodes, Assistant Managing Editor for News Video at the Post on Beet.tv.

The rise of the nomadic web browsing

“Welcome to the Weekend Web”, said Business Week. Internet browsing differs from weekdays to weekends. In this story, Google Mobile’s chief says that the biggest part of traffic on the search giant’s mobile sites occurs Saturdays and Sundays. The weekend’s mobile web promenade involves mostly classified and local sites. Among them (on the US market), Craigslist, both a huge classifieds site and a local destination. According to M:Metrics (now part of ComScore) mobile browsing has surged 89% last year and mobile page views are up by 127%. No doubt than within few years, the mobile Web will be bigger than current PC Web… but also harder to monetize.

Here are the top 10 sites viewed on mobile phones (figures are in minutes per user and per month) Craigslist_____99 mn

Ebay_________86 mn

MySpace______85 mn

Facebook_____84mn

Go.com(1)____67 mn

Google_______63 mn

Yahoo________53 mn

AOL__________41mn

Live.com(2)___37 mn

CNN.com_____10mn

(1) Disney portal gives access to ESPN

(2) Microsoft portal

Actually, The New York Times is also quite bullish about mobile browsing. In this video interview on Beet.tv, Michael Zimbalist, head of R&D at the Times, confirms the growth of mobile pages and explains the relationship the Times is developing between mobile and print content.

Honesty at the D6 Schmooze fest

A word (or two, or three) of explanation is in order. D6 is a conference organized by the Walt Mossberg, the personal technology guru of the Wall Street Journal. Over the years, Walt’s finely tuned columns earned him the position of high tech kingmaker. From there, a conference was born for his subjects to meet once a year near San Diego, California.

Second, “schmooze” , evolved from its Yiddish origin to designate an social networking activity. Sorry, for our younger readers, we’re referring to the BFB (Before Facebook) version of networking. There, we smell each other’s pheromones, make small talk, pin decorations on each other’s chest, discreetly but feverishly check we’re not missing the next Big Idea or slipping down the pecking order.

Third, Honesty. At such an event? With speakers ranging from Bill Gates and Steve Ballmer to Michael Dell, Jeff Bewkes (TimeWarner’s CEO) and Kevin Martin (Chairman of the FCC), there risk of honesty is infinitesimal. And that’s part of the fun. In the audience you have entrepreneurs, corpocrats, journalists, bloggers, investment bankers and venture capitalists. On stage, Walt Mossberg and Kara Swisher, his associate, pretend to interview the magnate of the moment. The fun is trained bullshit artists in the audience watching fellow artists prevaricating on stage. We admire the high wire act or lament the lame obvious “misstatement”.

The Gates & Ballmer show was highly professional, a testament to their experience, focus and preparation. We were first treated to the mollifying bit of schmaltz, how the love story between the two of them started at Harvard. Thus supposedly oiled, we got into more scabrous topics: Vista and Yahoo! No problem, we sold a lot of Vista, it’s been massively well received and, as always, we look forward to make our product even better. And, you know what, here is a quick taste of the even more wonderful Windows 7, available in 18 months or so, with our new invention: Multi-touch. And the coda: We avoid monopolies, we love to compete. The connoisseurs in the room nodded their appreciation: impeccable, first-class chutzpah, not a single hairline crack in the dam. Moving to Yahoo! things got a little less polished, a whiteboard was brought out and Ballmer did his Scale number: We need Scale in advertising, we’re still talking to Yahoo! about ways to gain Scale while not buying the company. But we’ll gain Scale by ourselves anyway because we never give up, we keep coming back, and coming back and coming back. The pros thought this was protesting a little too much.

But, Yahoo’s Jerry Yang and Sue Decker, the next day, made the Micro-couple look like the consummate fabulists that they are. Jerry Yang went through a “he said – she said” recount of the aborted deal and was caught flat-footed when asked to define Yahoo’s business. His minder, Sued Decker, regurgitated the party line but the damage was done, we were looking at a future has-been.

Jeff Bezos, his usual happy smart self unfortunately couldn’t resist bullshitting the bullshitters and danced clumsily around his refusal to release Kindle statistics. Too bad because the rest of his act was pitch perfect. He is loved and respected for all the right reasons: vision, execution and culture of the great Amazon.

Mark Zuckerberg brought his new adult guardian with him, the terrifying Sheryl Sandberg. Terrifying? See here quasi-Hillary résumé here. Unfortunately, her professional supervision didn’t spare us a dozen Zuckerberg robotic repetitions of the We help people share information and share themselves. Possibly a good company but definitely bad BS.

I saved the best for last. There was one straight shooter: Rupert Murdoch, the head of News Corp, owner of MySpace, a flock of TV and newspaper properties such as the Times of London, the tabloid New York Post and… the Wall Street Journal. Walt and Kara were interviewing their new master. Everyone in the room was paying attention, wondering who was on the high wire, Murdoch or his hosts. The boss doesn’t miss a beat, didn’t worry about admitting misfires or slow progress in places like MySpace, changing his mind a bit about the strategy – not the goal, depose the New York Times – for the WSJ. The man was speaking honestly, holding forth about media, newspapers – not the news – in trouble, the economy, in recession. And then came the moment: Who caused his New York Post to endorse Obama? Me. What? You support Obama? Well, I need to meet him but if he his the way he looks like, I might. Not a word of Clinton. We knew we were in the presence of a 78 years-old man who had reached a position of power without fear. No wonder the next day 23andMe, the personal genomics company (co-founded by Ann Wojcicki, Sergey Brin’s wife) asked for a sample of Rupert… More artful use of the American-English language here. –JLG

Facebook’s maturity problem

Like many startups, Facebook is confronted with a growth problem. Its outstanding traffic (30-35m unique visitors a month) is no longer growing; newcomers tend not to stay with the service as much as the early adopters still do; the Google-induced OpenSocial protocol is a threat and advertising has not taken off as promised. Recently, the investors in Facebook imposed teenage supervision of a kind: they hired Sheryl Sandberg, a former Google executive (see her interview at the D6 Conference)

Facebook is under more pressure from its investors as explained in New York Times DealBook. There, a professor of economics brilliantly reminds Mark Zuckerberg what are the rules of high tech funding. (For an overview of the social network current situation read also the story in Fortune)

Mobile phone –The value of data

ComScore, the internet measurement company, announced it was acquiring M:Metrics for $44m. Not a deal comparable to last year acquisition of Telephia by Nielsen, for $440m but still a significant event. This acquisition confirms that tracking the expansion of mobile devices as well as the behavior of its users is as important as the data currently collected on the Internet. M:Metrics is specialized in analyzing the usage of mobile phones, and more importantly, smartphones. As the founder of M:Metrics, Will Hodgman, pits it: “We want to know behavior across the internet regardless of device.” (His interview to Moconews, here).

How Wired does it: the “quant” way

I always considered Wired as the most inventive magazine of our time. It is always interesting, sharp, and fun to read. And its journalistic grasp is wide. Stories can be quite nerdy, which is fine since they are always carefully edited to remain readable by “the rest of them”. At times, editorial choices look not wired but weird when the magazine runs a story about a team of ship salvagers or profiles the structural engineer that built the Burj Dubai skyscraper. For having met the original founders of Wired, Louis Rossetto and Jane Metcalfe, back in 1993, I thought the magazine was still run by a kind of instinctive, passion-driven journalism consistent with the early days’ DNA. I was wrong.

Chris Anderson, the editor-in-chief, runs Wired on left-brain side. I visited him few weeks ago in San Francisco. The original HQ of the magazine remains the same, in the (former) industrial district of the city, where buildings have still high-ceiling and cinders-blocks walls. Anderson’s office is not filled with journalistic personal memorabilia, it’s all about data, charts, graphs on the walls and market reports on his desk and table. The guy is a data freak. “If I had the opportunity to run this magazine the same [quant] way as a hedge fund, I would do it without hesitation”, he tells me. Anderson’s editorial decisions are fact based. Months before an edition of Wired hits the streets, story pitches are circulated among staff members. They rank each project by vote. A passionate discussion ensues, in which Chris and his close staff will argue to include a pitch that ranked poorly or will kill a story they consider irrelevant. Once the table of content is set, three possible covers stories are market tested with various headline, graphics, etc on no less than 6000 panelists. In the background, Wired also relies on tons of surveys performed by the incredible sharp research department of Condé Nast, the magazine’s publisher. Each month, Anderson receives five centimeters of analysis of previous issue: story-by-story analysis, time spent by the readers, appreciation of content, length, graphic environment (very important).

This analytic approach to journalism has a lot to do with Chris Anderson professional background. He is a trained physicist who has worked in Los Alamos National Laboratory, before jumping into scientific journalism in Nature and Science. Then, he spent seven years at the Economist in London, Hong Kong and New York, as a tech editor and finally as the US bureau chief. (Anderson coined the term “long tail” — he even registered the brand, he’s now working on a book about the free economy). How does that translate into business? Well, Condé Nast is privately held company and does not releases figures. Wired is grossing about $50m, for a unknown profit (if any). But it is a hell of a brand — that allows other Wired Media entities to do very well. Today, Wired remains the perfect example of how a well crafted print product can make dollars and sense, even though it is a virtually free — a subscription costs $10 a year on the US market and its content is fully available online.

Times of India: let’s grow the market together

Talk with India media executives is always instructive and fascinating. Few weeks ago at the INMA Congress in Beverly Hills, I sat down with Bhaskar Das executive president of the Times of India in charge of marketing.

The Times of India is the largest English language newspaper in the world: 4m copies for 16 editions. Revenue of Times Group is about $1bn, 85% from print, mostly the TOI. The company is extremely profitable with a net margin above 30%. The Times of India serves a huge market: 1.2 billion people, approximately 220m literate in Hindi, and only 28m English readers. Of the latter fast growing segment, the TOI manages to capture 4m readers. Combined with the vitality of the Indian economy (around 8% GDP growth), the Times Group is adding a nice 25% to its core business each year. Times Group is also the publishers of the main business broadsheet, the Economic Times.

Unsurprisingly, advertising provides most of the revenue. In fact, the price of the Times of India is set just above the value of scrap paper, it ranges from 1 to 3 rupees (1.2 to 4 cents). Therefore, increasing the revenue by raising street price doesn’t make sense. Instead, the real upside lies in expanding the pool of advertisers. A few years ago, the executives of the family-controlled TOI came up with an original idea: “the private treaties”.

The principle is simple and clear: the TOI spots good and growing businesses, and delivers the following pitch: “You need to grow your business, to impose your brand, to expand your reach. Here we are, the Times Group, with our huge newspaper, TV and radio stations, internet sites, outdoors display. Here is the deal: we take a 1% to 15% equity stake in your company, in exchange, we sign an advertising deal at a discounted rate, and you have access to our media system”. As we say in French, it is “fromage et dessert” for Bennett Coleman & Company Ltd, the family owned mothership of the Times Group. Not only it increases its advertising revenue with a predictable stream of money (competitors of enrolled advertisers are also prompt to react), but also it is building quite a portfolio of roughly 200 small to medium size companies. The amount invested and the current values are not exactly known. The Indian business paper Mint (a JV with the Wall Street Journal) is estimating the value of BCCL’s private treaties assets to about $1bn for an initial investment of about $300m. That would make the Times of India one of the largest private investor of the country. As if this was not enough, Times Group announced this Saturday the acquisition of Virgin Radio UK for GBP 53m. In a way, the revenge of the former colony.

User experience — Microsoft Buying Love

Silicon Valley VC-dom is having a grand time watching Microsoft. It always did, in fear some time, with hope the Bill Gates would buy ingenious or annoying startups at other moments, always with respect for the giant’s impact on the high-tech industry.

Lately, the respect has turned into puzzlement. Because of, to simplify, Google and Vista. Google has exposed Microsoft’s inability to have any significant impact on search, advertising and, more generally, Cloud computing.

Vista surprised everyone, myself included, by how immature and uninteresting it is. To the point where Ballmer had to call it a “work in progress” — this five years after the previous version, Windows XP. So immature that many large organizations have decided against upgrading and launched a campaign to “save XP”, to force Microsoft to keep it available indefinitely. The market reaction to the new 2007 version of Office has been similar: Why bother?

I’ll hasten to say Microsoft is still hugely profitable: just Office made it more money in one quarter than Google in an entire year. But, last week, puzzlement turned into something else: a mixture of incredulity and worry. Is this all Microsoft has to offer to take Google down from its number one position?

“Microsoft is going to pay us to search!” said many stories. Not quite. It’s more complicated. When I search for a Nikon lens in Microsoft’s new Live Search site, I get offers from selected merchants. When I buy, Microsoft gives me a small percentage of the purchase price, 2% to 4%. So, I set up the Microsoft rebate money to go to my PayPal account and off I go, looking for the Nikon 85 mm 1.4 lens of my dreams. (Don’t go to Livesearch.com, that’s another company, they’re probably holding out for a better offer from Redmond.) For a lens worth about $1,000, live.com gets me 6 stores with discounts in the 2% to 4% range. Out of curiosity, I try Goggle. In one instance, the same merchant, B&H, offers the same lens for less than on live.com, in an “imported” version. And when I do research on the other Microsoft-offered merchants I won’t name here, I see slightly lower prices. But… a bit of research shows the sellers are labeled as crooks or worse by dissatisfied customers. Google also reminds me Amazon offers the lens for $999, free two-day shipping and no doubt about integrity. I try another search, for an inexpensive camera this time. The results are similar: the lowest price is from a company with an ugly reputation (and recently sold to another entity). For $10 more, you buy from Amazon. No complication, no paying one price and getting the discount later from Microsoft.

Let’s review. Microsoft Live Search: not really cheaper, not safer, not simpler.
Speaking of safety, it is fair to point out that some of the merchants featured on the right-side of the Google results page are known bait-and-switch artists. Also, several “shopping engines” on the same list are honey traps working for the scammers just mentioned. The good news is two minutes of googling gets you plenty of data on these schemes. Caveat emptor.
The other news from Microsoft is Per Action pricing. The advertiser only pays if the customer buys, downloads, makes a reservation. Much better than Per Click pricing, no? No. Merchants continuously evolve statistics measuring the conversion of clicks into action. In other words: How many clicks to get an action, a purchase. As a result, they already bid the clicking business with the Per Action cost in mind.

Is this how Microsoft is going to lift themselves from their 9% share in search (vs. Google’s 60% and growing)? Probably not. That’s why they’re still angling for a deal with Yahoo! Buying their search business only this time.

For more, a niece piece by Henry Blodget in Silicon Alley Insider: From the VC perspective, here, it’s hard to avoid ambivalence. Yes, this is quality entertainment. But how does this lead us to healthy start-ups? Even a “less than Google” search engine will get you a long litany of Microsoft fumbling attempts at gaining a meaningful share of the on-line business. Do we have a Satan IV (an old sci-fi novella) questions? Will the “new Microsoft” of the on-line world be as domineering as the old one was in the PC business, draining much of the resources, much of the money out of the domain?
In plain(er) English: how much oxygen left after Goggle inspires? – JLG

conglomerate — When accumulating, coherence turned to be key

Pendulum swing. Until recently, Barry Diller, founder and chairman of InterActiveCorp (IAC) was seen as the epitome of the digital media mogul, having accumulated something like 60 specialized brands, from Ask.com to a site called College Humor. Disparity was the trademark, and it was a probably Diller biggest mistake. Thirteen years into the IAC adventure, at the age of 66, he is up to a major turnaround. In an excellent profile published by Condé Nast Portfolio Magazine, he openly admits his error, explaining the dismantling of its assemblage (once valued at $19bn). “[Diller] now realizes that he was wrong from the start, writes Portfolio. Diller says he’s utterly committed to the idea of an anticonglomerate, blowing up IAC and leaving the company’s disparate parts to operate on their own. “We decided, ‘Enough of this integrated-conglomerate pretension.’ We were kidding ourselves if we thought we could pull off an integrated conglomerate that acts like G.E. or P&G in anything less than 10, 20, or 30 years”. Time to rely on the traditional business plan rather than serendipity-driven acquisition frenzy.