Author: mike

Working under the veil of “shareholder crusader”, Carl Icahn is currently on course to single-handedly destroy two tech giants and leave a third as an unwanted monopoly.

As you can tell, I’m not too happy with Icahn today.   This is a man who does not understand the search or advertising businesses at all.  As part of his smear campaign against Yang yesterday, Icahn was a babbling idiot as he discussed why Microsoft should buy Yahoo.  Basically he reiterated the same ignorant mantra – “the only way that Microsoft can compete with Google is to have Yahoo”.   There is no basis for this, and a whole lot of indicators that it is just untrue.  Most notable is that the only search market share shrinking more rapidly than Microsoft’s is Yahoo’s.

Icahn is a great businessman.  He can spot a company that could be sold for a short-term dollar.  But, he doesn’t know how to build products and never has.  Icahn’s history shows that he has NEVER built a product.  How is it that he knows anything about building a competing search engine to Google?   Where does he get these claims?   In fact, much more knowledgeable industry experts believe he is 100% wrong.

Icahn is not working in the interest of Yahoo shareholders.  Icahn just wants to make a buck.  Remember, he can sell yahoo for $26, make $1/share, and put $50 million back in his pocket.  He’d then blame Yang and Yahoo for having not sold for more.  Well, he knew that Yang had rejected the Microsoft deal before he invested!  At this point, his complaining about Yang or the Yahoo poison pill is pure posturing for him to make money.  (Has he talked to Yahoo employees?  Maybe he doesn’t know that they only reason they didn’t quit already was *because* of that retention plan?)

Unfortunately, Icahn may have already ruined Yahoo’s chances for short-term recovery.  If he is successful, he will also ruin Microsoft’s.  If the acquisition goes through, the most likely outcome is this:  Yahoo and Microsoft will both lose search marketshare during the 1yr transition.  Google will emerge as the unquestionable and unwanted monopoly.  Consumer choice in search will drop to dangerously few choices.  Advertisers will have no online choices.  Microsoft shareholders will be left having paid $40B to acquire an asset which was only worth $20B.  Nice.

I hope Microsoft comes out with a public statement, “we won’t purchase Yahoo at any price”.  This would clearly tell the industry, Microsoft employees and Yahoo employees to stop being distracted by Carl Icahn’s selfish antics.  Instead, we could all get back to work so that Microsoft/Yahoo could figure out how to gain market share against Google, and in the end, have 3 healthy, strong companies in the search/advertising markets.  Nobody wants a monopoly – not even Google.  Don’t let Icahn create one.

Don’t believe a word Icahn says.  He doesn’t know how to build companies or products.  He only knows how to make money while dismantling them.

Today Microsoft launched Live Search Cashback!  This service is really a merging of their Jellyfish service (Microsoft bought Jellyfish some time ago) with Live Search.  Microsoft says it’s going to help change the game against Google.

I first used Jellyfish back in October, 2007.  I thought the service was pretty nice.  They have a whole “community shopping” service, which I am not interested in, but from visiting their site, you can clearly see via the live “shopping smackdowns” that there are lots of people that do.  I guess their competition is probably the Home Shopping Channel and such.  Clearly shopping as entertainment is a very valid business.

The reason I signed up at Jellyfish was because we were buying some chairs online, and I found that the seller had an affiliate program through Jellyfish to give us 15% off.  15% off the $450 was over $50, so it was worth it.

Overall, affiliate rebates are just like mail-in rebates.  You never know when or if you’ll get paid.  So be careful.

Here is roughly what happens:

1.  You make a purchase.  You can’t go directly to the merchant’s site; you need to make sure you follow the links from the affiliate you are expecting the rebate from.

2. At that point, you’ll pay full price, and you’ll get the product delivered to you.

3. The seller has an agreement with the affiliate (Microsoft) that it will pay the affiliate every 90-120 days.  They do this to avoid paying rebates on items which could be returned, and also because nobody likes to pay bills promptly.

4. Finally, Microsoft can credit your account; since they’ve automated the process, I expect this is probably pretty quick – within 1-3 business days from Microsoft receiving the money.

5. Of course, Jellyfish/Microsoft know that it’s been 3-4 months since your purchase and there is a decent chance you’ll forget altogether.  So they won’t tell you the money is there.  You need to check your account, and if you’re lucky, you’ll have a balance to cash out.

If you haven’t used affiliate cash back programs before, you probably should now that Microsoft is fully in the game.  Most affiliate programs to date have not passed all the money back to you, the consumer.  However, Microsoft’s program does – they are passing 100% of the affiliate check back to you.  How does Microsoft get paid?  Well, technically they don’t – if you claim your money.  However, if you forget to pick up your check, well, they got paid anyway, didn’t they?

Overall, I think Jellyfish/Cashback is pretty cool and I will use it.  Over the long haul, however, I don’t expect affiliate programs will ever offer the best prices.  Management of affiliate programs is expensive, and as more companies make their own online efforts efficient, the cheapest prices will be direct from the manufacturer  (absent subsidies from Microsoft, that is :-).

A colleague asked me this morning if I had seen the Microsoft Mesh announcement.  I said I had, and that I thought it looked really pretty, but I didn’t get it.  “It looks like a solution in need of a problem,” I said.  My colleague went on to say that this was basically what Joel on Software had also said, and I just got a kick out of reading Joel’s diatribe.  I wish I wrote half as well as Joel.

Although I am not excited about Mesh, I am not as pessimistic about it as Joel is.  I think it’s great that Microsoft has projects like this.  Microsoft should be trying to innovate in as many ways as it can; and with innovation comes experimentation.  That’s not a bad thing, although Joel seems to think it is.

My only concern is that this project appears to have come from Ray Ozzie himself. It seems like something that a couple of smart kids out of school could do.  If I had the resources of Ray Ozzie behind me, I hope I’d come up with something much bigger.  Products that don’t change the world are not worthy of the Chief Architect at Microsoft.  So far, Mesh seems smallish.  But, he’s a smart guy.  Maybe the world-changing part is still coming; and if so, that’s great.

Alright, this is just a prediction.

The decision for Microsoft this weekend is whether they still want Yahoo or not.  If they still want it, it will be worth it for them to expedite the deal and increase their offer.  Going into a proxy fight doesn’t help anyone, and just drags this out.  So, in my view, there is zero chance of a proxy fight; if Microsoft still wants Yahoo, they’ll raise the offer.

If, however, Microsoft has decided they don’t want Yahoo, they’ll walk away.  I don’t believe those that speculate Ballmer would go through with the deal to avoid “losing face”.  There are plenty that would think Microsoft did the right thing by walking anyway.

Now, should Microsoft walk away, the Yahoo stock will tumble; if it stops at ~$20, where it was before the Microsoft offer, Yahoo should be pretty happy.  It may drop steeper than that.  Yahoo management knows this.  If Microsoft really wanted to play poker here, they could just wait 6 months and pick it up for even less.  But Microsoft doesn’t want that.  Microsoft wants this deal done now so that they can get back to business.  Yahoo doesn’t want the stock to tumble.

Based on Microsoft’s public comments about the advertising market over the next 5-10 years, I believe Microsoft wants Yahoo.  They believe the market they are trying to conquer is far larger than the price of Yahoo.  They don’t want to pay more for Yahoo (who would), but they know that any price less than $50B still pays itself back over the next 10 years if successful (and of course, Microsoft internally believes it will succeed).  As such, they’re going to do everything they can to close this deal.

I suspect a nominally increased offer from Microsoft has already been made. This will be enough that the chief Yahoos can claim victory and accept the deal at the same time.  This thing is going forward.

But what do I know.  More predictions.