One of the more interesting things about coming back to blogging after a short hiatus is that the Yahoo deal drama has only gotten worse. There's great coverage from many sources, including a good summary of recent analyst takes on paidContent.org, as well as a New York Times story now circulating that News Corp may combine with Microsoft to complete a deal for Yahoo, presumably to combine MySpace's social media strengths with MSN and Yahoo's strengths along with a combined ad network. The counterfoil to this is a possible deal to merge AOL into Yahoo.

Certainly an AOL/Yahoo merger would help Time Warner's plan to get out of the portal business and help Yahoo to grow market share significantly - and certainly working towards one set of user accounts, one messaging network and other combined infrastructure could become very valuable over time. But one wonders how much time and effort would be spent on merging plumbing on these two legacy platforms to get a unified portal business when they could have been focusing on the growth in traffic comes from social media products that operate largely via other platforms.

By contrast the Microsoft/NewsCorp/Yahoo combination may offer a lot more punch for a shareholder's money. Leveraging the power of MySpace, a still-powerful social media platform well-attuned to mass media markets with Yahoo's strength in content aggregation and user accounts and Microsoft's strength in software development, platform strength and ad network brokerage, all in one package, has a lot of interesting parts that could produce more value in the long run. AOL and Yahoo combined, for example, will do little to penetrate mobile markets more effectively. Yahoo, Microsoft and MySpace, by contrast, could make some interesting things happen in mobile between platforms, social media, user accounts and ecommerce.

This is all well and good, but why are we so fixated on this deal, anyway? It's not that it won't create some sea changes over time, but the strengths of a deal with Yahoo come largely from what the partners may offer in combination. Yahoo is big, still powerful - but for the most part in its lifecycle a cash cow with relatively low new product investment waiting to be turned into hamburger. The real issue is what this means in terms of exit plans for online content and technology companies, as pointed out by Fred Wilson over on A VC - that is, if a company with fairly obvious marketable attributes like Yahoo has a hard time cashing in, what does this mean to online plays in general? If there's no exit at the top, what does that say to other players?

Somehow a deal will be forged for Yahoo in the next few months if the company's staff doesn't implode before then from takeover stress. But in the meantime I honestly don't think that it's all that significant a deal to watch from the overall industry's standpoint. Big will get a bit bigger - and that combined entity will still look nothing like Google. I think that we're seeing that overall getting any bigger is not necessarily going to solve anything in online markets. Online publishing is still in its infancy, still requires an enormous amount of investor patience as new ideas face daunting risks and still will have periods of high uncertainty that don't lend themselves to quarterly reports, much less private shareholder reviews. In other words, while some people are still focusing on making larger dinosaurs the long money is still probably in making more and better mammals. Be patient, be foresightful - and don't get too caught up in the scuttlebutt.

Labels: Deals Partnerships and Sales, Google, MSN, MySpace, News Corp, Yahoo

Bloomberg News covers Stanford Group analyst Clayton Moran's claims that the seeming listlessness of Yahoo's management since Terry Semel's departure and sinking share prices are laying the groundwork for an inevitable and likely sale of Yahoo. Moran cites Microsoft as the likely bidder and beneficiary of online synergies that would boost both properties into a newly competitive position against rival Google. There are a lot of things that still argue for this combination - invigorated search technology and online office components from Microsoft, advertising know-how and effective destination content development from Yahoo - and a such sale is certainly not improbable. Yet I can't help thinking that this may be one of those "perfect" marriages that would go south far more quickly than people may imagine.

The main rub that I see is that both companies suffer from two similar maladies: weakening market mindshare for their brands and dysfunctional product development cultures. Microsoft has had a remarkable string of product introductions that have been flops, duds or near-misses, in spite of having a near lock on many key technologies. Its Internet Explorer browser, once the unchallenged ruler of online Web content consumption, now boasts only about 70 percent of the European marketplace, a problem only exacerbated by mobile content markets moving further away from Microsoft technologies. Yahoo has many comparatively healthy and innovative initiatives, but some of its most innovative properties such as Flickr, del.icio.us and Yahoo! Pipes are either standalone brands or initiatives that are relatively orphaned from the mainstream Yahoo offerings. The Semel legacy of traditional media development stalled the effective development and integration of social media, a strategic error that Yahoo is working hard to correct but nevertheless a legacy of poor market timing that Microsoft will do little to bolster.

Moreover a Yahoo acquisition will do little to help Microsoft penetrate the enterprise/prosumer space very effectively. Yahoo's withdrawal from enterprise services a few years back left the playing field open for Google, which is still at the foothills of enterprise content but building a steadily growing array of products and integration resources to build that base over time. On the consumer side the addition of Microsoft properties to Yahoo's ad base would be a strong plus, but not one that could not be offered by other parters as well with greater online growth potential.

Which brings us to the question: who would want to buy Yahoo? I think that it's far more likely that News Corp will see a Yahoo acquistion as a perfect complement to its holdings.Its online management team is both upbeat and highly experienced with social media via Fox Interactive Media's MySpace platform and would offer Yahoo a better chance to develop as a dominant media brand with a strengthened advertising base. Yahoo's strong online finance portal would complement potential content fed in from Dow Jones holdings should that deal close, a deal that would have already provided News Corp with good enterprise revenues and technology platforms. Yahoo entertainment offerings would complement MySpace nicely and its enormous base of user accounts would offer MySpace a shot in the arm as Facebook builds a stronger market share.

The only real question for a Yahoo sale is timing - and it's likely that Yahoo's nascent social media replacement for its less-than-booming 360 portal may be the timing telltale. If the introduction of this effort is not stunning or if management becomes discouraged in its early testing phases then it's highly likely that a deal will be executed fairly quickly one way or another. But don't be surprised if quiet talks are already in the works - no doubt awaiting News Corp's finalization of Dow Jones details before focusing on Yahoo. Other potential suitors such as TimeWarner could enter the picture (AOL round two? Probably not.) but few offer clear synergies. We'll see whether Microsoft has the gumption to pull the string on a Yahoo deal, but my guess is that they have their hands full with many core competitiveness issues already - and that News Corp will be able to define more profitable synergies and longer-term brand strength before Microsoft gets to pop the question.

Labels: Deals Partnerships and Sales, facebook, Microsoft, MySpace, News Corp, TimeWarner, Yahoo

Om Malik notes along with many of the technology media digerati the recent expulsion of image hosting site PhotoBucket's content sharing widgets from the MySpace social media portal. The grievous charge against PhotoBucket? Ads. Along with content from the widget embedded in a MySpace page the viewer would get a PhotoBucket-provided ad. So in a twinkle of an eye PhotoBucket loses a distribution partner for its social media content. Mind you there's some pretty sad irony here in that MySpace gets content free from its millions of users and ad-free partners to generate ad revenue with near-zero editorial expense. It would seem only fair that MySpace recognize that others who are contributing to their revenue successes need to be compensated also.

The rub in this equation is revenue sharing. Unlike ad-supported mashups like TheNewsRoom.com, which shares its ad revenue with distribution partners, PhotoBucket somehow didn't think it proper to compensate MySpace for the "rental" of their context to display its revenue-generating content. If they were a little more savvy PhotoBucket would have approached MySpace ahead of time and proposed a revenue split based on MySpace-embedded ad revenues. If they were more than a little savvy PhotoBucket would have set up a system similar to TheNewsRoom that allows distribution partners to set up a self-service license for ad-supported content. In either case both MySpace and PhotoBucket have shot themselves in the foot by eliminating a popular content feature that was adding value to audiences in MySpace.

We've been talking for several years about how contextualizing content and not just ads would become the next great online revenue opportunity, so the storm of widgets invading social media properties should come as not surprise. But in an era of user-defined aggregation there needs to be a more automated regimen for determining when and how revenue-generating content can play alongside other commercially-supported content. With users constantly defining new contexts in which to share widgets and other embeddable content forms neither the services providing venues for those widgets nor the distributors of the content can afford to waste time in traditional licensing negotiations. The value of the contexts is far too fleeting to make them pay off effectively in many instances.

Content producers using widgets for distribution also need to think more carefully about how to structure their offerings for partners with different commercial outlooks. Some content could be made available through free-only partners and additional content for those willing to allow ad-supported or fee-based revenue sharing. Whatever the regimen content producers taking advantage of social media tools to embed their content in various contexts need to remember that advertising is all about selling contexts, not content. When a widget or other social media tool is embedded in another site the value of the context requires both the content provider and the site provider to recognize that the value of the context created by these tools is the sum of both parts.

As more and more users embed content in platforms of their choice media companies need to acknowledge that portals are not always going to be the play that gives them the best promise for contextualizing their content. We need to get to a point where we could have a MySpace widget that also embedded a PhotoBucket widget where a user wanted it. This is the new form of aggregation that will be most likely to pay off for publisher in the long run. All the world's a TiVo, so get your content ready for it to reside wherever it needs to - and to partner with whomever is there who has a right to share in the profits.

Labels: Monetization, MySpace, PhotoBucket, Social Media, Trends