Microhoo! Microsoft offers to buy Yahoo for $44.6 billion

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No joke. Microsoft made an offer of $44.6 billion to acquire Yahoo, thus FINALLY creating a competitor to Google. Steve Ballmer, Microsoft CEO, publicly released the following letter discussing the merger.

January 31, 2008

Board of Directors
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089
Attention: Roy Bostock, Chairman
Attention: Jerry Yang, Chief Executive Officer

Dear Members of the Board:

I am writing on behalf of the Board of Directors of Microsoft to make a proposal for a business combination of Microsoft and Yahoo!. Under our proposal, Microsoft would acquire all of the outstanding shares of Yahoo! common stock for per share consideration of $31 based on Microsoft’s closing share price on January 31, 2008, payable in the form of $31 in cash or 0.9509 of a share of Microsoft common stock. Microsoft would provide each Yahoo! shareholder with the ability to choose whether to receive the consideration in cash or Microsoft common stock, subject to pro-ration so that in the aggregate one-half of the Yahoo! common shares will be exchanged for shares of Microsoft common stock and one-half of the Yahoo! common shares will be converted into the right to receive cash. Our proposal is not subject to any financing condition.

Our proposal represents a 62% premium above the closing price of Yahoo! common stock of $19.18 on January 31, 2008. The implied premium for the operating assets of the company clearly is considerably greater when adjusted for the minority, non-controlled assets and cash. By whatever financial measure you use – EBITDA, free cash flow, operating cash flow, net income, or analyst target prices – this proposal represents a compelling value realization event for your shareholders.

We believe that Microsoft common stock represents a very attractive investment opportunity for Yahoo!’s shareholders. Microsoft has generated revenue growth of 15%, earnings growth of 26%, and a return on equity of 35% on average for the last three years. Microsoft’s share price has generated shareholder returns of 8% during the last one year period and 28% during the last three year period, significantly outperforming the S&P 500. It is our view that Microsoft has significant potential upside given the continued solid growth in our core businesses, the recent launch of Windows Vista, and other strategic initiatives.

Microsoft’s consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers. In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together. These discussions were based on a vision that the online businesses of Microsoft and Yahoo! should be aligned in some way to create a more effective competitor in the online marketplace. We discussed a number of alternatives ranging from commercial partnerships to a merger proposal, which you rejected. While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing.

In February 2007, I received a letter from your Chairman indicating the view of the Yahoo! Board that “now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction.” According to that letter, the principal reason for this view was the Yahoo! Board’s confidence in the “potential upside” if management successfully executed on a reformulated strategy based on certain operational initiatives, such as Project Panama, and a significant organizational realignment. A year has gone by, and the competitive situation has not improved.

While online advertising growth continues, there are significant benefits of scale in advertising platform economics, in capital costs for search index build-out, and in research and development, making this a time of industry consolidation and convergence. Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers. Synergies of this combination fall into four areas:

Scale economics: This combination enables synergies related to scale economics of the advertising platform where today there is only one competitor at scale. This includes synergies across both search and non-search related advertising that will strengthen the value proposition to both advertisers and publishers. Additionally, the combination allows us to consolidate capital spending.

Expanded R&D capacity: The combined talent of our engineering resources can be focused on R&D priorities such as a single search index and single advertising platform. Together we can unleash new levels of innovation, delivering enhanced user experiences, breakthroughs in search, and new advertising platform capabilities. Many of these breakthroughs are a function of an engineering scale that today neither of our companies has on its own.

Operational efficiencies: Eliminating redundant infrastructure and duplicative operating costs will improve the financial performance of the combined entity.

Emerging user experiences: Our combined ability to focus engineering resources that drive innovation in emerging scenarios such as video, mobile services, online commerce, social media, and social platforms is greatly enhanced.

We would value the opportunity to further discuss with you how to optimize the integration of our respective businesses to create a leading global technology company with exceptional display and search advertising capabilities. You should also be aware that we intend to offer significant retention packages to your engineers, key leaders and employees across all disciplines.

We have dedicated considerable time and resources to an analysis of a potential transaction and are confident that the combination will receive all necessary regulatory approvals. We look forward to discussing this with you, and both our internal legal team and outside counsel are available to meet with your counsel at their earliest convenience.

Our proposal is subject to the negotiation of a definitive merger agreement and our having the opportunity to conduct certain limited and confirmatory due diligence. In addition, because a portion of the aggregate merger consideration would consist of Microsoft common stock, we would provide Yahoo! the opportunity to conduct appropriate limited due diligence with respect to Microsoft. We are prepared to deliver a draft merger agreement to you and begin discussions immediately.

In light of the significance of this proposal to your shareholders and ours, as well as the potential for selective disclosures, our intention is to publicly release the text of this letter tomorrow morning.

Due to the importance of these discussions and the value represented by our proposal, we expect the Yahoo! Board to engage in a full review of our proposal. My leadership team and I would be happy to make ourselves available to meet with you and your Board at your earliest convenience. Depending on the nature of your response, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!’s shareholders are provided with the opportunity to realize the value inherent in our proposal.

We believe this proposal represents a unique opportunity to create significant value for Yahoo!’s shareholders and employees, and the combined company will be better positioned to provide an enhanced value proposition to users and advertisers. We hope that you and your Board share our enthusiasm, and we look forward to a prompt and favorable reply.

Sincerely yours,

/s/ Steven A. Ballmer

Steven A. Ballmer

Chief Executive Officer

Microsoft Corporation

2008 is going to be an exciting year, no doubt.

Full story here

Las Vegas Pubcon Recap

Las Vegas Pubcon Recap

It’s hard to describe the feeling that is *being* in Las Vegas. The places, the people, the parties… it’s quite extravagant. One month ago, I had never even been to Las Vegas, but now, I have been twice thanks to the recent Blog World Expo and most recently, Pubcon Webmaster Convention.

What do you get when you combine Las Vegas, with a professional networking event and a contest called Party Like A Search Engine Rockstar? ANSWER: A ridiculously fun and productive networking experience!

Rolling With The Search Engine Rockstars

Party Like A Search Engine RockstarUnlike Blog World Expo, UBD did not exhibit at Pubcon, and this time, it was only I who traveled to Las Vegas.

The primary reason for going was that UBD sponsored Shoemoney’s recent contest, Party Like A Search Engine Rockstar. The contest winner was Laura Martin, who won an all-expenses paid trip to Pubcon to party with the search engine rockstars.

This is not the first time that Laura has partied with search engine rockstars, however. Laura was also a contestant on The Next Internet Millionaire and even prior to that, Laura worked closely with some of the top Internet marketers in the industry.

For much of the trip, I hung out with Laura and Tigh Buckles, Shoemoney’s new project manager. Everyone stayed at the Flamingo Hotel on the North Strip.

Tigh, me and Laura
Tigh Buckles, Me, and Laura Martin hanging out at the Wynn

Continue reading Las Vegas Pubcon Recap

My Experience with Facebook


When the whole “social networking” thing first started to become popular in the summer of 2004, I was one of the first persons in my class to sign up for MySpace. At that time, it was the only “must join” social network because Facebook was only available at select colleges.

All of my friends thought I was stupid for signing up for a MySpace account to meet and collect e-friends, but I had an intuition that there was something worthwhile, not to mention efficient, about networking online. Over the next two years, I collected over 500 friends on MySpace despite never seeing the benefit of having so many friends for only “social” reasons.

Peace Out, MySpace

After becoming progressively more frustrated with the useless Myspace comment banter, I deleted my account in December of 2006 and haven’t looked back since. A month later, I started my personal blog, NateWhitehill.com. Social networking for me evolved from MySpace to blogging; one of the best decisions I have ever made was to migrate my social networking to my blog.

It didn’t take long for me to see the benefits from networking through my blog compared to networking through MySpace. Instead of people seeking me out for purely social reasons (e.g., an ex-girlfriend), people were seeking me out for professional reasons. This eventually led to a realization that I could market my products and services exclusively through the Internet and thus save thousands of dollars of marketing costs.

Given where I am at in my life – professional development is much more important to me than socializing, partying, or dating. In other words, I found my blog to be much more beneficial than MySpace as a professional networking tool, even more so than LinkedIn, which I have also used, but not quite seen the benefit from.

What About Facebook?

Ever since Facebook opened their registration to everyone, my sister and many others have encouraged me to sign up. As a result of my useless Myspace experience, I never saw value in signing up for another social service that provided little-to-no professional benefit.

To get to the point of this story, I never thought I would say this, but I finally signed up for Facebook and have to say that I have been VERY impressed.

Why did I sign up? Our team is in the beginning stages of developing a web application, and what better place to study what works and what doesn’t than on one of the most widely used web apps on the net – Facebook. Not to mention, but with 50 million users and a new platform for delivering highly-targeted Ads, Facebook looks very attractive from a marketing perspective.

Mark Zuckerberg Deserves To Be A Billionaire

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Facebook really took off in 2004 when Harvard freshman Mark Zuckerberg dropped out of college in order to develop the application full-time. Within 7 months of launch, Facebook had over one million college students actively using the network. Three years later, over 57 million people are actively using Facebook, including over 200 people from my graduating class!

Check out this growth chart of Facebook’s users over the past three years:

facebook growth

Facebook has been averaging over 250,000 new registrations per day since January of 2007 and active users are DOUBLING every 6 months!

Facebook’s Legitimacy

To me, what makes Facebook much more legitimate than Myspace are several things:

  1. Instantly when you register, it more easily facilitates finding old friends and other people you know. Case in point, within 24 hours of signing up for Facebook (and not even publicly announcing it to anyone), I received over 30 friend requests from people I know.
  2. The demographic of Facebook is much more mature than MySpace. According to Facebook’s own statistics, more than half of Facebook users are outside of college. Not only that, but the fastest growing demographic is those 25 years old and older.
  3. The applications built into Facebook, such as photo and event sharing, are light years ahead of MySpace.
  4. The Facebook Developer Platform provides for an infinite number of marketing and data collection possilibites.
  5. With the new Facebook Ads platform, you can reach a niche audience with relevant and highly-targeted ads and optimize your site with onsite analytics.
  6. There is less risk of encountering fraudulent users on Facebook compared to MySpace.

Facebook As An Application

I am sure this is not news to most of you who use Facebook, but the technologies, networking tools, and web applications built into it are incredibly intuitive and advanced.

Facebook’s photo sharing application is the most widely used one on the Web (according to comScore). This puts it ahead of other applications including Flickr and PhotoBucket, which reminds me… PhotoBucket sold earlier this year for $250 million.

Probably the coolest thing about Facebook is that it is a platform on which others can build applications. There are currently over 7,000 applications that have been built on Facebook. Applications can do everything from displaying quotes of your friend’s favorite pop artists to allowing you to showcase your recent blog posts on the Facebook profile (like I do).

I was so impressed with Facebook that I took time to watch the young Facebook CEO give a 45-minute keynote speech at the f8 Developer Conference. If you want to check out this soon-to-be billionaire give a great speech to over 800 developers, check out this link: f8 Keynote.

Facebook’s Professional Benefits

From a professional and business marketing standpoint, Facebook appears to be much more useful than MySpace. We all know that a huge majority of people using MySpace are high-schoolers, whereas Facebook’s user base consists more of college-aged individuals and adults.

Facebook allows one to create special Pages for businesses or brands. I created a Facebook Page for Unique Blog Designs, and instead of accumulating friends, we have fans. (Click here to become a Facebook fan of Unique Blog Designs.) Our Facebook page seems like it will fit well into our marketing mix as we now have another avenue to communicate with past and future clients.

ubd facebook

Young Entrepreneurs Are Inspiring

A huge part of what motivated me to get involved in making money online was from other young and successful entrepreneurs. It was November of 2006 when I first became intrigued with Zuckerberg’s success, and it was through researching him that I stumbled upon Digg and eventually John Chow’s blog. It was through John’s blog that I became inspired to start my personal blog…and here I am, 11 months later, involved in my most successful and fulfilling business enterprise to date (UBD).

Late last year (2006), Zuckerberg turned down a $1.6 billion buyout offer from Yahoo. Some would say he is stupid, but maybe he is just that much smarter. A month ago (October, 2007), Microsoft purchased a 5% 1.6& equity share in Facebook for $240 million.

By this measure, Facebook’s actual value is between $5-10 billion $15 billion, which is almost as much as worth more than MTV! All this for a company that was conceived only three years ago!.

Zuckerberg still possesses a roughly 30% share in the company, so when and *IF* Facebook sells, Zuckerberg will very likely be one of the youngest billionaires in history! The other option is of course, Facebook going public which will also make Mark a very well-off individual.

Conclusion

I suppose that most people would expect that a geek like me would be all over what many people call the coolest web application on the Internet. Honestly, it is surprising even to me that I didn’t sign up for Facebook earlier. Reconnecting with old friends and meeting new ones is done much more easily and professionally through Facebook.

Even though Facebook is light years ahead of MySpace as far as technologies, application, networking tools, and professional benefits, in my opinion, Facebook is still dwarfed by the tremendous professional benefit that one can achieve through personal blogging. I will save that comparison for a future article when I have had more time to evaluate Facebook.

If you want to be my friend on Facebook, you know what to do.

Corrections made: Microsoft purchased a 1.6% equity share in Facebook for $240 million, making Facebook worth approximately $15 billion, which is more than MTV. On paper, Mark Zuckerberg is worth several billion dollars.

Golf + Fitness + Authority = Meet Mike Pedersen

Golf + Fitness + Authority = Meet Mike Pedersen

What happens when you mix golf, fitness and the dedication to be an expert in a particular niche? Meet Mike Pedersen, the golf fitness expert. Mike Pedersen is a well-known golf blogger in the golf and fitness communities.

Don’t be fooled by his excellent search rankings – Mike doesn’t practice any Blackhat SEO. Mike is simply a great example of how to build authority in a particular niche – by teaching other people who you know! Mike has done this by recording dozens of videos and writing hundreds of articles for people looking to be healthy and perform better golf. In his time online, he has built a newsletter list of over 40,000 people!

Mike is most well-known for his Perform Better Golf which provides golf exercise dvds, a best-selling golf training manual as well as a golf stretching dvd.

Golf Online Fitness Professional

Mike is the golf fitness professional for Golf Magazine’s site GolfOnline.com and for Golf Illustrated.com. He has produced over 500 articles on the topice of fitness and golf that have been seen various publications and sites (including Pub Links Golfer, Orange County Register, Arizona Golfer,and Men’s Health), journals and newspapers worldwide.

How is that for using your authority to reach the outside world?

Meeting Mike

I was fortunate to have met Mike very recently as both he and I reside in Scottsdale, Arizona. Not only is Mike very well educated in online business development, marketing and search engine optimization, but he also is a guy who you don’t want to mess with, and I say that in the nicest of ways. Mike has been in the fitness industry for 25 years and it clearly shows – the guy is incredibly ripped, and it doesn’t surprise me that his average golf drive is over 300 yards.

Mike Pedersen’s Golf Blog

Mike’s new golf blog contains a plethora of useful articles for people looking to play better golf and live a healthier lifestyle. Mike does a fantastic job of consistent, day-in and day-out writing thorough and useful content. As proof, within two weeks of launching his blog, Mike already had over 150 RSS subscribers!

I play a little bit of golf myself and I particular enjoyed the following articles:

To me, there are several things Mike does which makes him an excellent blogger, several of which include:

  • Frequently posting high quality and thorough articles on link-worthy topics
  • Carefully choosing titles which encourage the reader to continue reading
  • Excellent usage of photos and other visuals within the post to help break up the blocks of text
  • Implementing other forms of media into his blog such as his regular videos containing golf fitness tips
  • Engaging in a dialogue with his readers which encourages more comments to be made
  • Internally linking to other posts and articles he has written

The funny thing was that I first read about Mike before I ever met him! An old friend of mine recommended a book to me called The New Rules of Marketing and PR (no aff) written by David Meerman Scott. One of the stories in the book was all about how Mike used the Internet and online communication to establish authority as a golf fitness expert.

It was only when I launched Unique Blog Designs that I received a contact message from Mike looking for assistance at setting up a new blog, MikePedersenGolf.com. It didn’t take me long to realize this was the same guy in the book I had just read! Those kind of experiences definitely make you feel like it is a small world.

I want to congratulate Mike on his success so far in his niche and I wish him the best of luck in expanding his empire.

For more information about Mike and Perform Better Golf, visit:

  • Mike Pedersen’s Golf Blog
  • Perform Better Golf