All Out Media War? Yahoo! and AOL vs. Microsoft and News Corp.

April 9 – Despite many impressions that Microsoft’s offer to buy Yahoo! for $31 a share was dying down and potentially would go away, all sides of the transaction are shifting strategies. On April 5, Microsoft gave the Yahoo! board until April 26th to make a deal or face a hostile takeover, which would include offers directly to shareholders with the potential for a lower bid. The Yahoo! board continues to formally reject Microsoft’s offer. With Yahoo! stock generally stagnant over the last 52 weeks (about $6 in either direction of the current close of $27.77 on 4/9/08), shareholders are much more likely to let money talk than are rich, ego-driven board members that want Yahoo! to remain independent.

New developments are in the air: The New York Times reports that Microsoft is in talks with News Corporation, the media acquisition leviathan, to make a joint bid for Yahoo! (Yahoo! Finance acknowledges this possibility here). Additionally, Yahoo! and AOL are said to be close to a deal themselves: Time Warner will agree to fold AOL into Yahoo!, while Time Warner would invest cash into 20 percent of the combined entity (giving AOL a $10 billion value). Should these be true, it could pin two very highly-bankrolled operations against each other with no room for error. So, what is all the fighting about?

It is likely that Yahoo! is fighting for its independent life, or at least wants to choose its own destiny, to prove it still has what a website needs to remain in the environment of Internet companies that matter. In the last several weeks, Yahoo! has had several major announcements in the last few weeks in an attempt to prove just that. Yahoo! launched “Buzz,” a news and Internet traffic aggregating website similar to Digg, Del.icio.us, Newsvine, and Stumbleupon. Yahoo!’s Flickr recently launched a video service, hoping to be the first realistic competition for Google’s Youtube. Yahoo! announced the acquisition of IndexTools’ Analytics Business in an effort to expand online marketing efforts. It also recently disclosed plans to use Google’s ad search engine, a revolutionary team-up between rival search engine companies. Essentially, the two companies agreed that Yahoo! could test Google’s search-based advertising in an effort to fend off Microsoft (think: enemy of my enemy is my friend).

Absent these recent efforts, Yahoo! would have little reason to give shareholder that it is in their best interest to wait this process out and have faith in the Yahoo! board. Though the leadership of the company cruised in neutral while companies such as Google flew by, they have woken up and realize they have work to do in re-establishing Yahoo!’s name. These three developments may just be enough to show shareholders that the company is working overtime and handing over the reigns to another company would thwart any efforts in keeping Yahoo! competitive.

If this is the board’s strategy, they too should make sure they are moving full speed ahead. If these recent developments at Yahoo! do not prove to shareholders that selling is a bad idea, the victor of this acquisition war will enjoy quite the spoils.

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Rescue Me. What Microsoft Can do for Yahoo! (Updated)

Feb. 8 – Assuming that Microsoft jumps through the infinite regulatory hurdles and pleases the masses of Yahoo! shareholders, Microsoft has a lot of work to do with the nearly-outdated search engine. The New York Times discuss here whether or not it is too late for Yahoo! to remain an independent viable competitor with Google. I have faith that with the right innovation, several things can be done to turn around Yahoo!. Microsoft’s acquisition is not a necessary condition for this to take place; it does, however, present an excellent opportunity for a comprehensive overhaul Yahoo.com needs to remain competitive.

Here are five things that Yahoo! did wrong or is still doing wrong that need to change in order to re-invent itself:

1. Give the homepage a face lift – I know that Yahoo!’s classic look is the infinite links, the ads, the current event’s box, weather, and on and on. The numerous boxes and superfluous colors, however, are reminiscent of websites from 1999 (see the 1995 page here that demonstrates few changes and a general lack of the site’s evolution). People are no longer impressed with so much information in one spot. In fact, it begins to look obtrusive and busy. Yahoo! tried a face lift a few months back, but it was in the wrong direction (click here for the site before the most recent update). They need to simplify, rather than have more of the same.

Even with the majority of the Internet community moving towards broadband download speeds, all of that information takes time to process and is distracting. MSNBC and CNN recognized this within the last 12 months and grossly simplified their homepages (click to compare old and new sites for MSNBC and CNN). Google’s minimalist approach may be an over-swing of the pendulum, but something in the middle must be employed.

2. Update the logo – Normally, I would not advise changing a company’s logo, but this is a drastic case. People associate the current logo with a feeling of being outdated and behind the times. A lot has happened since the mid-1990’s when that logo came out. The internet has had waves of ideological change in terms how companies portray themselves. Even AOL updated it’s logo post-Time Warner acquisition (from this to this – same concept, modern look). Even if Yahoo offers the best services, people will continue to associate the company as a second-place player behind newer, more innovative companies. Yahoo! doesn’t have to drop the “!” or its name entirely, just modify and modernize the look. A company should never be afraid to re-invent itself.

3. Limit the number of obtrusive ads – Ads from Yahoo! are often bright, animated, and very distracting. This includes ads on the homepage, as well as within the email system. If I am writing an email, or reading one for that matter, the ads with high colors and complex animation are so distracting I find it hard to concentrate. Additionally, remove the “signature line” ads from its users’ emails when they send messages. When I see an email, and at the very end it says, “Check out the new Yahoo! Cars,” it looks like a cheap shameless plug to get me to look at the website. A company with the prestige of Yahoo! doesn’t need to resort to start-up company tactics. Moreover, young professionals hesitate to use Yahoo! mail as their primary email if their communications with employers and other professionals include this type of advertising.

3a. On the subject of email, Microsoft and Yahoo might even want to collapse their two email services into one and create a new product. Yourname “@hotmail.com” is no longer “hot” and “@yahoo.com” is no longer exciting. Combine all users into one email system and create a new domain name that represents an innovative email system.

4. Don’t be afraid to be innovative – Yahoo! came out with “Answers” a while back, which I find both informative as well as entertaining. Since then, I have heard little of new services (there may be some, I just haven’t heard of any). Yahoo! should place more emphasis on products such as these that make its site more interactive with its users. I am not sure of taking it to the extreme of creating a social networking site like Facebook within Yahoo!, but something that draws in a crowd. Don’t create copycat services to sites already in existence. Create new ideas. Once Yahoo! comes up with more products and services like this, press hard to market to people the new feature and make it known to people all over the internet.

5. Integrate the user with all of Yahoo! products – The growing trend for new websites is how successfully they can serve as a dashboard for people’s lives. Keeping email together with calendars, pictures, and favorite websites is critical. Making a one-stop shop for people’s lives makes sure they don’t have to go anywhere else. Services like “My Yahoo!” are a step in the right direction, but what I am talking about goes beyond that. I mean creating programs that sync calendars on your Outlook, iCal, and other organization programs all in one place. This includes being able to share calendars and other vital information with other users.

There are many more ideas that may contribute to Yahoo!’s overhaul that would modernize its appeal and success with current Internet users. The five mentioned above only serve as a starting point.