Google-Yahoo! Deal Not So Far-Fetched

By Eric Jackson, Senior Contributor10/25/11 - 06:00 AM EDT


NEW YORK (TheStreet) -- Over the weekend, it was leaked out that Google(GOOG_) was interested in helping at least a couple of private equity players to finance a purchase ofYahoo!(YHOO_).

Most folks have protested loudly against this possibility by concluding that such a deal would never get past the U.S. government. Google, with already two-thirds of the market share of the search space, would significantly increase that by taking over Yahoo!'s share and leaving the rest of the market to Bing, Ask Jeeves, and whoever else is left.

Of course, that is right. Google previously tried to strike a deal with Yahoo! after the 2008Microsoft(MSFT_) buyout was pulled and before Carol Bartz signed up to outsource its search to Bing. That potential tie-up between Google and Yahoo! was discouraged by the government.

So why is Google leaking out this information now? These are smart guys. They know that search is a non-starter.

One cynical theory is that they have no interest in Yahoo! at all. They're merely trying to seem interested so that Microsoft will be forced to more aggressively bid for Yahoo!

With a company that bid "pi" for the Nortel patents before Apple(AAPL_) and a consortium of others won them, I suppose anything is possible. However, I just don't see what the point is for Google to do this.

Will leaking something cause Microsoft to bid $25 instead of $20 for Yahoo!? That would be the equivalent to an extra $4 billion to Yahoo! shareholders that Microsoft would have to pay out. That's not chump change, but is that really going to hurt Microsoft? And why would Microsoft really take such action based on one leak?

Which leads me to conclude that there is real interest by Google in Yahoo! However, I don't think it's for its search business.

I think the jewel for Google in the Yahoo! empire is its display ad business. That's a $2 billion a year business for Yahoo! and many believe that Yahoo! is dramatically under-monetizing it. What could it be worth under Google using DoubleClick's technology? $3 billion? $4 billion? Google knows better than us.

Read the full post on TheStreet

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More IPOs Are Needed

By Eric Jackson, Senior Contributor12/15/10 - 06:00 AM EST

NEW YORK (TheStreet) -- Last night, I watched the Charlie Rose interview with Groupon Founder and CEO Andrew Mason. It was the first time I've seen him speak and, aside from a bad sense of humor, I was impressed.

What grabs your attention is that these guys started a company and reportedly got a $6 billion buyout offer within two years -- in the wake of the deepest recession since the Great Depression. Tony Robbins should make them a case study to pump up his audience at future motivational seminars.

Different reports circulated this past week that Groupon does annualized gross revenues of $2 billion before splitting profits with the merchants they refer business to. That kind of growth demonstrates how -- in an era of Facebook and Twitter -- good ideas and businesses can propagate like crazy.

What's more impressive about Groupon though is it's turning down Google's(GOOG_) generous buyout offer. Instead, it opted to go it alone and grow its business. Here's what Mason said about why it did that: "Here is what I can say. I think every choice we make in the company comes down to a core of this idea we have of what Groupon could be and the place it could play in the world and in the rest of the 21st century. And every choice we make is which option will it make it more possible for us to get there? " So I think whatever we decide to do with the company, the people that we hire, the deals we run, every itty-bitty choices, how do we build this company into something that transforms the way people buy from local businesses."

If the offer on the table for Groupon was $6 billion, Google was offering to pay four times what it paid for YouTube four years ago and double what it paid for DoubleClick three years ago.

We're just not used to people saying no to that kind of money.

Four years ago, Facebook turned down a reported $1 billion offer from Yahoo!(YHOO_)(YHOO). Eighteen months later, Microsoft(MSFT_) invested $240 million in the company at a $15 billion post-money valuation. There were calls at the time that the price was completely unrealistic and showed how desperate Microsoft was to stay relevant. Yet, today, most analysts say the company would be worth $30 billion to $50 billion if it went public.

........

[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

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CNET: Google-DoubleClick may bode well for Microsoft-Yahoo deal

Posted by Dawn Kawamoto Post a comment
March 11, 2008 2:04 PM PDT - CNET

With the Google-DoubleClick merger wrapped up Tuesday, Yahoo may face even greater pressure to find itself a buyout partner, according to Wall Street analysts and investors.

The Google-DoubleClick deal presents a greater threat to Yahoo's business of providing both Internet search advertising and display advertising, note analysts. And, as a result, Yahoo now has another issue to contend with, beyond Microsoft unsolicited mega-billion buyout deal waiting in the wings.

"The Google-DoubleClick deal provides further firepower to Microsoft to win over Yahoo," said Mark May, an analyst with Needham & Co. "Microsoft's bid price is the key driver to a Microsoft-Yahoo merger, but increasing competition from Google is the second factor. And within the broader category of competition from Google, the DoubleClick deal is one more factor."

DoubleClick will provide Google a strong entry into display advertising and transform it into more of a full-service advertising company with both display and search - an arena that previously differentiated Yahoo from its competitors, May said. As a result, it may weaken Yahoo's case for remaining independent.

Yahoo investor Eric Jackson, a shareholder activist hedge fund Ironfire Capital, notes it strengthens the case that the industry needs a stronger No. 2 to compete against Google-DoubleClick.

"It doesn't help Yahoo's management in any way who are still trying to seek out a white knight," Jackson said. "This doesn't present any other possible suitor for them other than Microsoft and raises the question of how Yahoo is going to better compete against a combined Google-DoubleClick on their own? Wouldn't they be better teamed up with Microsoft?"

A number of Wall Street and industry observers, as well as anti-trust experts, had largely been anticipating Google to land the DoubleClick deal and receive regulatory and shareholder approval.

"It's hard to see how Microsoft, or Yahoo, had been proceeding as if this deal (Google-DoubleClick) were not going to happen," said Derek Brown, an analyst with Cantor Fitzgerald.
"It's fairly logical to think that one of the reasons the deal was initiated in first place was because of Google's expected acquisition of DoubleClick. It's hard to see how there's a radical change in viewpoint now."

One analyst notes that Yahoo, ironically, got itself into its current predicament of greater pressure from Google by expressing an interest in acquiring DoubleClick years ago. That, in turn, put Microsoft and Google into a heated bidding war. But last April, Google announced it had won the battle with a $3.1 billion bid for DoubleClick.

And while the Google-DoubleClick deal may put Yahoo's business at greater risk, it could help grease the skids on the regulatory front should it ultimately do a deal with Microsoft, said anti-trust experts.

"I would expect the Commission to assess the Microsoft-Yahoo deal using exactly the same legality benchmark that it used in the Google-DoubleClick merger," said Luc Gyselen, an anti-trust attorney at Arnold & Porter's Brussels office. "In that case, the Microsoft-Yahoo deal strikes me as pro-competitive. It is indeed important for customers to have a few real alternatives to choose from. It does not matter all that much how many alternatives there are on paper. What matters is how effective the alternatives are in the real world."

Gyselen, who previously served in several senior positions with the Directorate-General for the Competition Bureau of the European Commission, noted that Microsoft's past troubles with the Commission should not affect any outcome in how its merger efforts are treated in Europe.

"Talking from my own experience, each merger or antitrust case is handled on its own merits. Therefore, I cannot imagine that Microsoft's past and current dealings with the antitrust part of the Commission's Competition department would create spill-over effects into the mergers field."

(Elinor Mills contributed to this blog)

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