Rav (URL) said:
Jul. 14, 12:40 PM
Good post and a very good point. Guarantee is meaningless if tied to traffic. Think about what this means. If MSFT wants to reduce its commitment to YHOO under this deal, all it needs to do is to degrade its ad placement technology which shouldn't be too hard to do (may even happen naturally with Powerset :-) - no pun intended).
Compare this to the GOOG deal:
1. GOOG deal is non-exclusive. YHOO can choose to partner with others. MSFT deal is not only exclusive, but it also puts restrictions on potential transactions that YHOO may want to do, as per YHOO's press release.
2. YHOO can choose to increase or decrease the traffic outsourced to GOOG as it pleases. So it has full control and it can benefit from improvements made in-house. MSFT deal essentially means killing its internal ad placement efforts (which are second-rate) and go with third-rate technology developed my MSFT.
3. GOOG offers better TAC rates than MSFT.
4. GOOG has a lot more inventory and significantly better technology, so click-through and conversion rates should be significantly better than MSFT.
It would be interesting to see how this plays out at the Senate hearing. I think GOOG will contrast its offer with that of MSFT and show that a non-exclusive deal with full flexibility for YHOO is definitely not as anti-competitive as the exclusive and restrictive deal offered by MSFT.
It seems like Icahn and MSFT are grasping at straws here, without making any significant effort to work out a deal that would be acceptable to most shareholders of YHOO and current BOD. In fact Icahn is now helping MSFT to milk the cows without paying for them.
