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Technology

Who Wants A Piece of Yahoo?

After Microsoft’s unsolicited bid for Yahoo last week, it seems everyone has their theories about what is actually going to happen. Will Yahoo accept the offer and piss-off most of their employees? Will they hold up their middle finger and realize that they need to get their act together? The only thing we know so far is that there may be alternative outcomes beyond MSFTYHOO.

  • Private Equity Buyout – There’s a slight chance that a private equity firm could purchase Yahoo with the hope of reselling down the road, but it’s a slim one. The credit crisis in America has led to tighter restrictions so we’ve seen fewer private equity acquisitions lately because of this.
  • Apple – CEO Yang has been an admirer of Steve Jobs in the past (and even came on stage to introduce the iPhone) and at least one report has speculated on an Apple buyout. The problem is that Apple doesn’t have enough cash on hand and I can’t see Jobs wanting to blow their cash stash on a company that doesn’t really benefit them. Now if Apple bought Adobe that would make more sense, but Apple Yahoo?
  • Google – Google has reached out to Yahoo in an attempt to outline what a bad decision the MSFT acquisition would be, but it seems Google might be holding all the cards. It’s been noted that most of Yahoo’s core services run on FreeBSD, Apache, and other open source technologies, and Microsoft’s core services run on Windows Server and Microsoft-centric technologies. If Microsoft successfully acquires Yahoo then it might tie up their collective engineering resources for a very long time trying to integrate their platforms, and that would allow Google to really push forward with its Office-killing web applications. People are saying that Google might want to acquire Yahoo, but I think Google’s secretly hoping the acquisition happens so that Google appears to be the most nimble of all technology companies.

Startups And The Recession

There’s no doubt in my mind that the U.S. economy is headed for a recession. The Federal Reserve just cut rates — again — down to 3.50%. This, coupled with oil’s rising prices, the fall of the value of the dollar, the rise in inflation, and the credit lending problems are all pointing to a dramatic downturn in the stock market. Heck, U.S. markets opened today down 5% but managed to come back a few points through solid intraday trading. This isn’t just a random blip on the radar, it’s a signal.

The genius behind the Drama 2.0 blog posted his thoughts on the recession’s effect on the tech industry so I’m going to jump in and post two impacts of the recession right here.

What Will Get Cut First?
When budgets get tight and revenues aren’t as high as they were in the glory days, what will go first is marketing. You can’t dip on your core competencies and get rid of a dozen highly-skilled engineers because then you’re cutting your own throats. Getting rid of your top people and replacing them with low-level morons was the reason that CompUSA went out of business, and cutting the head off your engineering department is a similar mistake.

When advertising gets cut, the ones with the lowest ROI will be the first to get the slash, and that’s going to mean CPM advertising. With CPC, a company is putting all their effort into converting the click on their own website so they control the conversion rates. CPM ads put all the pressure on the publisher to get good click-through rates, and if they’re paying top dollar for CPM rates on popular sites and aren’t getting a good CTR, then it’s a waste of money. AdWords and AdSense aren’t going to drop much, but CPM rates will.

Investors Change Their Tune
VCs have been pouring dollars into companies like paper money is going out of style (*cough*) and 2008 will be the year they take a more careful look at their investments and investment strategy. Investing in pre-revenue companies with no revenue strategy is a lot different than pre-revenue companies that have a solid revenue strategy, and you can guess which type of company won’t be raising as much money this time around. The theory of “past success indicates future success” when it comes to startup founders is going to be flipped around and although an entrepreneur may have had a big name a few years ago, investors will realize it’s a totally new game in 2008. If you’re giving away the cow (the service) and the milk (unique value proposition) for free then you don’t have much of a leg to stand on when it comes time to introduce a revenue model for your “at scale” company. You may be big, but you’re not sustainable. And money doesn’t grow on trees anymore.

Apple Pays Off Nick From ThinkSecret

After a long and tumultuous struggle between Nick from Think Secret and Apple, they’ve resolved their issues and Think Secret will be publishing no longer.

This is especially interesting to me because I’ve been a reader of Think Secret for many years, essentially since the site started, and followed the lawsuit from its genesis to now. Nick is actually a few years younger than I am, is still in college, so seeing him go up against a giant company like Apple is interesting for me since I’ve enjoyed his reporting over the years.

As part of the press release that Think Secret posted, it said that a “positive solution” had been reached for both sides. To me, that means the lawsuit has been dropped and perhaps Nick got a payoff to stop writing. I don’t know what type of payoff, perhaps Apple paid his legal fees plus some cash, but maybe it was larger than that. Maybe once the EFF got behind Nick’s case Apple realized they were going to lose, so they decided to turn the tables and stop that from happening. If Nick won then other rumor sites could safely pursue information inside of a protective Apple NDA without worrying about the legal consequences, so by Apple paying off Nick it stopped the forthcoming rumor flood.

Ars Technica mirrors my sentiments in that they also believe he got a nice payday:

“Apple was faced with losing the case and having to pay attorney’s fees,” explained Opsahl, which is likely part of the reason why it decided to settle instead of continuing to pursue it. As for Ciarelli, “We understand that Nick is very satisfied with the outcome of the case,” Opsahl said. “We hope that Apple learns a lesson over this.”

With a wad of cash in his pocket and some real journalistic work experience behind him, Nick can no move forward and has many opportunities to choose from. Of course those opportunities don’t include writing about Apple rumors, but there could be far worse outcomes to this story.

Google To Expand Its Wireless Plans?

It’s astounding to me to think about Google and then picture them buying Sprint, a “real company” in my eyes. Google’s a search company and Sprint makes things and builds things and has advertising and all the things “real companies” seem to have. But to put things in perspective, Google has a market cap of over $200 billion which is more than 4x the market cap of Sprint Nextel, so Google is certainly a larger company.

Google’s Open Handset Alliance announced last week had a lot of hand-waiving and fun illustrations, but was short on actual product. Phones running Google’s Android platform are nearly a year away from being in consumer’s hands, so there are a lot of questions still up in the air. If Google were to acquire Sprint Nextel, it would certainly give more credibility to their hand in the poker game of their cellphone “alliance” and might open up some additional avenues in regards to generating revenue.

So many people hate the telecom industry and cable companies that if Google were to purchase Sprint and use their infrastructure to build out a high-speed, long-distance wireless network, I can see many people ditching Comcast or TimeWarner and jumping on the Google bandwagon. Broadband pipes are so locally saturated in the major metropolitan areas that wireless alternatives might be a good fit for people fed up with lobbyists having a larger impact on their cable companies then their own petitions. Personally I’d love to see Google sell a WiMAX set-top widget that would coordinate with a cellphone widget to push WiMAX speeds to me wherever I am. Unfortunately with Google pursuing the handset alliance it seems if these pipe dreams (no pun intended) come true, iPhone users will be left out in the cold. At least until a 3G iPhone appears and by then anything is possible.