Yahoo! might have wriggled free of Microsoft for the time being but it is now getting closer to Google than many PPC experts are comfortable with. Yahoo!’s overt flirtations with Google proved to be the ultimate poison pill that turned away Microsoft’s uninvited attentions.

Most in the search marketing community were rooting for a deal between Microsoft and Yahoo!, not because we love Microsoft or dislike Yahoo!, but because we felt that the combined forces of the two mega-firms would provide a truly capable competitor to Google. That didn’t happen. As it stands today, we’ve transited from a potential to create greater competition to the very real potential of seeing far less competition in the lucrative PPC marketplace.

On yesterday’s Webcology show on WebmasterRadio.fm, we explored the Post MicroHoo environment with Search Engine Watch Executive Editor Kevin Heisler and WorldBenefactor.com co-founder Greg Meyers. (Greg also publishes the blog SEMGeek.com).

It was an interesting conversation. Kevin covered the business ends of the equation and Greg passed out several tips on PPC bidding strategies his non-profit WorldBenefactors.com site is adopting in the post MicroHoo world.

I had wanted to get Metamend’s PPC Specialist Mark Johnstone on the show to share his thoughts on bidding strategies should Yahoo! and Google deepen their paid-search relationship. Unfortunately, (or fortunately, depending on how one looks at it), Mark was busy in a client conference call during the live show.

We’ll be doing a follow-up show when the dust settles, probably a couple of months or so into the future. In the meantime, please enjoy the warmth, wit and wisdom of yesterday’s Webcology.

Yesterday, YHOO opened at $23.28 per share and rose gently through the day to close at $24.37 per share. This morning, it opened far higher at $25.55 per share, instantly fell to $24.20 per share and then quickly rose to peak at $26.03, the point they trade at right now (12:10 pm-pacific).

This was NOT an expected outcome. When Microsoft CEO Steve Ballmer openly closed the door on a deal, observers anticipated immediate and extraordinary losses for Yahoo!’s shareholders. Though down from their Valentine’s Day peak of $29.98, YHOO is still trading well above their low of $19.18, the day Ballmer announced Microsoft’s acquisition attempt.

Donning my counter-intuitive thinking cap, (and opening this round of speculative writing), I’ve been trying to make sense of Yahoo!’s NASDAQ yo-yo act.

My first thoughts think there is a massive buyer out there snatching up blocks of stock as they become available. That could make sense given the public sense that Microsoft hasn’t really backed away from the deal. If Microsoft or an institution friendly to Microsoft was buying votes in the form of YHOO shares, we could be looking at a kinder and gentler type of hostile takeover bid. May 15, incidentally, is the last date a proxy-fight can be openly initiated before Yahoo!’s annual general meeting on July 3.

Similarly, perhaps there are a number of institutions and large buyers lining up to pick a piece of Yahoo!’s pocket in the event it becomes a target again.

In a dissimilar vein my second thought thinks there might be a large buyer friendly to Yahoo! shoring up share prices in the hopes of pacifying a greater Yahoo! shareholders revolt while deepening their own business arrangements around Yahoo!. Building on extremely shaky ground requires seismic shoring or the foundation will crack before the walls are built. Better to stabilize the platform before building a bigger structure.

I have a third thought but it’s just too wacky to be believed… Perhaps, just perhaps (like in an alternative universe where most of us would rather live but don’t…), regular investors are seeing value in Yahoo! shares. The only thing propping that theory up is the fact that many investment firms have moved YHOO from “sell” to “hold” status today.

The Microhoo drama remains one of the most interesting stories to watch. As things stand right now, it hardly looks like it’s over.

The question, which is probably meaningless to anyone living in the United States, South America, Europe, Asia, Africa, the Middle East and even most of Canada, involves the fate of a brand-character for a regional beer brewed and sold in British Columbia. Just above the article content, a banner ad asks, “Should the Kokanee Ranger Live or Die?“  Believe it or not, it is a rather important query ringing in the ears out here.

So here I am, sitting at the southern tip of a rather large but isolated island on the far-west coast of North America reading news published on a far less isolated island on the far-east coast of North America and I get confronted with a banner ad promoting a regional beer that has absolutely nothing to do with New York. Neat eh?

Well, it’s mostly neat but not entirely magical. By monitoring my IP address, the display advertising distribution company serving the New York Times selected an advertisement from its inventory that would likely match my desires or needs as a male Canadian consumer on the west coast. Canadians are known to enjoy their beer and British Columbians are known to drink pint after pint of that particular regional beer. Chances are I might be interested in that kind of beer as well, especially as I get a voting stake in the life-cycle of the Ranger, a beloved but bumbling character who protects BC’s beer supply from the ever-thirsty Sasquatch. (I kinda like the guy so I voted for his survival).

Speaking of survival, the advertisement serves as a reminder that Yahoo! has a far larger advertising footprint online than the simple PPC ads we associate with the enormous profits Google has enjoyed over the years. Yahoo! remains the dominant player in the display advertising market, even after Google’s acquisition of display ad-giant DoubleClick.

I would have liked to conclude this post noting the BC-based ad I saw this morning was served by Yahoo!. Unfortunately I can’t. The New York Times uses Google’s DoubleClick for its display advertising needs. Nevertheless, it is good to be reminded of such things. Yahoo!, while damaged and somewhat degraded after the three month Microsoft debacle is NOT down-and-out.

REDMOND, Wash., May 3 /PRNewswire-FirstCall/ — Microsoft Corp.
(Nasdaq: MSFT) today announced that it has withdrawn its proposal to
acquire Yahoo! Inc. (Nasdaq: YHOO).

The news came out of Redmond Washington early Saturday evening. Microsoft CEO Steve Ballmer announced that Microsoft was walking away from their attempt to acquire Yahoo!.

In a long letter (reproduced below) to Yahoo! CEO Jerry Yang, Ballmer outlines his decision and is clear about his disappointment with the outcome. Ballmer is less clear about his future intentions, leaving the door open for another acquisition attempt while falling back on Microsoft’s oft heard but unproven mantra, “We Can Do Search Ourselves”.

Over at Search Engine Land, Danny Sullivan has written a definitive analysis of the weekend’s events, (Leaving Las Yahoo: Microsoft’s $5 Billion Mistake?) and Yahoo!’s multiple options, including links to several other takes on Ballmer’s $50Billion Balk.

I don’t think this is exactly over yet. Tomorrow morning will give us a better idea what Yahoo! shareholders think as the markets are certain to react swiftly.

Steve Ballmer’s Letter to Jerry Yang:

May 3, 2008

Mr. Jerry Yang
CEO and Chief Yahoo
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089

Dear Jerry:

After over three months, we have reached the conclusion of the process regarding a possible combination of Microsoft and Yahoo!.

I first want to convey my personal thanks to you, your management team, and Yahoo!’s Board of Directors for your consideration of our proposal. I appreciate the time and attention all of you have given to this matter, and I especially appreciate the time that you have invested personally. I feel that our discussions this week have been particularly useful, providing me for the first time with real clarity on what is and is not possible.

I am disappointed that Yahoo! has not moved towards accepting our offer. I first called you with our offer on January 31 because I believed that a combination of our two companies would have created real value for our respective shareholders and would have provided consumers, publishers, and advertisers with greater innovation and choice in the marketplace. Our
decision to offer a 62 percent premium at that time reflected the strength of these convictions.

In our conversations this week, we conveyed our willingness to raise our offer to $33.00 per share, reflecting again our belief in this collective opportunity. This increase would have added approximately another $5 billion of value to your shareholders, compared to the current value of our initial offer. It also would have reflected a premium of over 70 percent compared to the price at which your stock closed on January 31. Yet it has proven insufficient, as your final position insisted on Microsoft paying yet another $5 billion or more, or at least another $4 per share above our $33.00 offer.

Also, after giving this week’s conversations further thought, it is clear to me that it is not sensible for Microsoft to take our offer directly to your shareholders. This approach would necessarily involve a protracted proxy contest and eventually an exchange offer. Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo! undesirable as an acquisition for Microsoft.

We regard with particular concern your apparent planning to respond to a “hostile” bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid Internet search terms offered by Yahoo! today. In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo! undesirable to us for a number of reasons:

- First, it would fundamentally undermine Yahoo!’s own strategy and long-term viability by encouraging advertisers to use Google as opposed to your Panama paid search system. This would also fragment your search advertising and display advertising strategies and the ecosystem surrounding them. This would undermine the reliance on your display advertising business to fuel future growth.

- Given this, it would impair Yahoo’s ability to retain the talented engineers working on advertising systems that are important to our interest in a combination of our companies.

- In addition, it would raise a host of regulatory and legal problems that no acquirer, including Microsoft, would want to inherit. Among other things, this would consolidate market share with the already-dominant paid search provider in a manner that would reduce competition and choice in the marketplace.

- This would also effectively enable Google to set the prices for key search terms on both their and your search platforms and, in the process, raise prices charged to advertisers on Yahoo. In addition to whatever resulting legal problems, this seems unwise from a business perspective unless in fact one simply wishes to use this as a vehicle to exit the paid search business in favor of Google.

- It could foreclose any chance of a combination with any other search provider that is not already relying on Google’s search services.

Accordingly, your apparent plan to pursue such an arrangement in the event of a proxy contest or exchange offer leads me to the firm decision not to pursue such a path. Instead, I hereby formally withdraw Microsoft’s proposal to acquire Yahoo!.

We will move forward and will continue to innovate and grow our business at Microsoft with the talented team we have in place and potentially through strategic transactions with other business partners.

I still believe even today that our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares. By failing to reach an agreement with us, you and your stockholders have left significant value on the table.

But clearly a deal is not to be.

Thank you again for the time we have spent together discussing this.

Sincerely yours,
/s/ Steven A. Ballmer

Steven A. Ballmer
Chief Executive Officer
Microsoft Corporation

Given the lack of events last weekend, it’s hard to get all excited about the latest round of news, rumours and innuendo but I get paid to get excited about this sort of thing so here goes…

He’s gonna or he’s not. It’s come down to a the simplest of complex choices for Microsoft CEO Steve Ballmer. An emergency Microsoft Board of Directors meeting held yesterday gave Ballmer the absolute power to make a decision to move forward into hostile territory or retreat to the relative discomfort of his Redmond Washington office. The decision is expected to be announced this weekend, possibly as soon as this afternoon.

To further complicate Ballmer’s already complicated day, a Town Hall meeting has been called at Microsoft today where lay-offs are expected to hit some of the 75,000+ on-campus employees. Who gets hit and which departments are re-organized might offer important clues to Microsoft’s long-term planning.

Ballmer yesterday stated that Microsoft can go it alone and build its own online advertising platform. Unfortunately, that statement appears more bluster than brag as Microsoft has repeatedly tried to build an effective online advertising system to compete with its far larger rivals AdWords and Yahoo! Search Marketing. Though Microsoft owns the display advertising firm aQuantive, it is not seen as a serious challenger to Yahoo!’s Right Media or Google’s DoubleClick.

To further complicate matters, Yahoo! and Google have been making beautiful music together recently in the form of an advertising distribution deal between the two mega-firms. It actually looks as if Yahoo! could probably survive on its own. Perhaps it just took the push of a very real threat to shake Sunnyvale into action.

Everything is so fluid right now there is really no way to possibly predict the eventual outcome.

One thing is certain though. Microsoft and Yahoo! have both been damaged over the past four months. Though it might not look weakened on the surface, Microsoft will take an enormous hit if the Yahoo! deal does not get done. If Ballmer can’t pull this acquisition off, his tenure as CEO at the world’s largest software maker might come to an ignoble end. Microsoft has ended up with the short end of the stick far too many times when it comes to exploiting the potential of the Internet for fun, profit and long-term development. It’s Vista operating system has given commentators like myself five years of poking fun at Microsoft for not getting it together, while giving early adopters headaches and heartburn. In short, what should have been a major triumph has turned into a public embarrassment. Ballmer wears Microsoft’s public failures on his sleeve.

Even if Ballmer does end up pulling Yahoo! into Microsoft, he will face the herculean challenge of merging two uniquely different corporate cultures into one. Birkenstocks do not go nearly as well with pinstripes as one might suppose.

Today, an awful lot of money and prestige is on the line. Steve Ballmer is going to go hostile or he goes home. Time is of the essence and with Yahoo!’s Annual General Meeting sneaking up quickly, time is getting very tight indeed. Expect action…

The show is worth a listen for organizations that have yet to write or implement a disaster management plan. Facing the toughest challenge our 10-year old firm has ever faced, the Metamend team had a well thought-out road map to follow. When the administration put the plan to action early Sunday morning, every one of the staff knew what they had to do and set about doing it.

By Monday morning, we were each working from our home offices with a communications backbone in place and access to our common files reassigned and thus restored. By Tuesday, the team was as close to reclaiming its general working rhythm as possible. Looking back on a Friday morning, it is now possible to see beneficial sides to what could have otherwise been an unmitigated disaster.

From what I’ve gathered, the only client who noticed a difference between this week and last week was the one that shared the now shattered industrial complex our office used to be housed in. That’s a thankfully muted testimonial to the strength of our disaster management and recovery plan.

One interesting benefit our clients are almost certainly going to notice is that each of the staff is reporting the temptation to work longer hours. I’ve worked from home for almost four years now and can attest to the irresistible pull of the keyboard at both 7AM and 7PM. While a number of the Metamend team have long been known to work longer hours than others, almost all of us are reporting a 2 - 3 hour increase in actual work-time per day. While this might be seen as a sign of disaster driven over-compensation (the tendency to work harder in times of perceived emergency), it is more likely due to an increased ability to focus without the artificial boundaries imposed by a clock. Lunch gets pushed back to 3PM (when one’s body tells you to stop and eat) and work ends when dinner is served around 8ish.

Murray and David did a great job explaining the implementation of the disaster management plan and the stellar reputation management exercise the firm undertook in the early days following the fire. A previously recorded 16-minute interview with David on file at WebmasterRadio on Reputation Management as a search marketing service rounded out the hour.

Earlier today, Google announced the winners of the annual Anita Borg academic scholarships awarded to outstanding female leaders in technology. University of Victoria Ph.D. student Celina Gibbs was one of four Canadian women to achieve the scholarship.

Google established the scholarship program in 2003 to honour the groundbreaking work of Dr. Anita Borg, an early computer scientist who dedicated herself to increasing the participation of women in technology. 2008 is the first year women in Canadian universities could apply. The award is also now open to female computer science students in Europe, Australia and New Zealand.

Congratulations Celina.

“Hello, I’m not sure if you’re they guys I need to talk to but I have a problem…”

Somebody has an emergency. Their business is in trouble and they know they need help. Since they are calling us with a big problem this is likely the first point of contact our agency has had with the caller. They almost certainly should have called sooner…

“My website was getting lots of traffic and making sales but in the past couple of weeks, all that has dried up. What should I do?”

Search engine optimization and marketing firms get this type of phone call every day. Somebody has invested a lot of money (relatively speaking, of course) and probably a lot of time into his or her online business and now they have an issue. Most of the time, the caller didn’t know who to speak with about their problem until it hit a critical point. Often, they didn’t even know they had a problem until their disaster struck. When it did, they would have turned to a friend or business associate that then referred them to us. Such is the extended marketing cycle for a well known search marketing shop.

Getting the caller to describe the nature of their problem while checking out the website gives our staff a few minutes to perform basic SEO/SEM triage, a process that often reveals a few minor errors that obviously carry major implications. During the basic triage, we’ll ask questions like:

- “How long has your website existed at this domain?”
- “Have you ever had another search engine marketing firm work on this site? If so, when?”
- “When was it last updated? What was changed and why?”
- “Have you ever been involved in a link-building campaign? If so, when and how much (if anything) did it cost you?”
- “Do you have a marketing budget?” (This is an important though often uncomfortable question. It has to be asked. One’s time literally is their company’s money.)

The series of questions is partially designed to simply get the caller to open up to us. He or she is asking us to make comment on one of their most valuable assets, their online business. We need to know more about the business, its goals and the people behind it before feeling comfortable making swift pronouncements. That, and we’re stalling for time. We need a few minutes to think through whatever problem is put before us. SEOs tend to be highly analytic problem solvers. Their answers are nevertheless important as they serve to inform the SEO about who they are dealing with and what that person really wants accomplished.

SEO is about combining the technical skills of a very good webmaster with the persuasive language and design skills of a very good marketer. The set of skills found in most search marketing agencies resemble those found in a sampling of 15 university students gathered at random on any liberal-arts campus. Some excel in language, history or psychology, while others excel in math, science, engineering and architecture. Curious, philosophic and almost always over-educated, the collective brain(s) of a modern search marketing shop tend to span a wide array of intellectual disciplines. It’s not rocket science though by the same measure, neither is auto-repair. SEO is however far more challenging than the rebuild of a old Slant-6 or the rehabilitation of a carburetor.

The metaphor between SEO and auto-repair is useful for the needs of a typical emergency caller. Their problem is often a technical glitch that needs to be found and fixed. There is one essential difference between the two that makes all the difference in the world.

The difference between emergency auto-repair and the emergency SEO call is that automotive repair requires hands-on work. Emergency SEO triage does not. A good SEO can often spot a problem and verbally instruct someone through the solution. Their problem is, they can’t do that and be responsible at the same time.

In a perfect world, we could often clear up their problem during that initial emergency phone call, offering basic webmaster advise for free in the hopes the caller will remember us fondly when they launch another web-based business. Unfortunately, the world is far more litigious than perfect. Before offering any free advice, we need the protection of a contract to prevent being held accountable for what would otherwise be viewed as an act of goodwill by the vast majority of reasonable persons. Since we’re not the ones doing the hands-on work (in this scenario), we can’t guarantee it was done correctly. Search engine marketing firms are thus put in a position where the caller has to become a client before we are able to offer our assistance.

In most ways, this is disappointing for techies of goodwill. The vast majority would be happy to help under other circumstances but when a professional opinion is solicited, professionals need to act, well…, professionally.

In the long run the situation could prove to be of greater benefit to the newly minted client. Having somehow found their way into a problem a clever SEO shop can solve for them, chances are there are several other services available that will propel their business further along towards their goals.

We’re going to get another emergency SEO call. For all I know, one of the staff is fielding one right now. Each gets the respect and attention it deserves but each will be handled professionally. It’s an important rule every SEO shop should follow.

Though Metamend’s offices are currently inaccessible, the company continues operating as normal. Working from home-offices, staff members are responding to telephone or email inquiries, and client engagements are continuing as usual while the administration is securing new office space.

Critical company assets, such as client and corporate data, are housed and stored off-site where it is both secure and accessible to Metamend staff. Metamend’s search engine marketing services will continue without interruption or hindrance. Metamend expects that customers are unlikely to notice any changes in service delivery over the upcoming week.

“Fortunately, because of the nature of our business, our staff and administration is able to work remotely until new office space opens later this week,” said Metamend President, Glenn Convey. Convey continues, “Metamend will execute a disaster management plan for its facilities. With current technology and investment made over the past year, our administration has been able to re-establish operations quickly and efficiently. Fortunately, no one was hurt from the fire and the damage is confined to facilities only.”

According to media reports, it took the efforts of 24 firefighters, four fire engines, an aerial ladder and a rescue truck to battle the late-night blaze. Metamend would like to extend its gratitude and appreciation to the Saanich and Victoria Fire Departments.

Though nothing happened over the weekend, most expect Microsoft to make an announcement early this week. What that announcement will bring is another question. Yahoo!’s Board has mounted a stiff and surprisingly strong resistance to the acquisition attempt, seemingly in a bid to drive Microsoft’s offer higher. Microsoft however, has warned Yahoo! it does not intend to increase its offer.

Some financial analysts are now predicting that Microsoft could just pack up and walk away, leaving Yahoo! spinning and reeling after four months of frantic dodging.

Perhaps this period of Sitzkrieg has been part of Microsoft’s overall strategy all along. Even if it doesn’t acquire Yahoo!, Microsoft has succeeded in weakening Yahoo!’s position and in forcing Yahoo! to alter its business plans well into the future. In short, Microsoft has totally knocked Yahoo! off its game. Even it it walks away, Microsoft has won position against its #2 rival.

In many ways, Microsoft’s antics might be the very best thing that could happen to Yahoo! as it has moved what was feeling like a moribund monolith to make substantial changes in an attempt to differentiate itself and remonetize its content. Yahoo!, though weakened, might actually be placed on a path to better health if it survives this ordeal.