Cap’n Ken’s Homespun Wisdom

So last night Microsoft officially bailed on its offer to buy Yahoo. Jerry’s kids stuck to their guns on acceptable pricing and scared Ballmer away from a proxy fight with talk of a Google alliance. Well done, I say.

The only thing that would have made sense about this acquisition was a really big premium for Yahoo shareholders (I am one), and what Microsoft (I own it, too) was offering was a big premium on a stock depressed by a lot of missteps and the general decline in stocks over the past six months. YHOO was trading above Microsoft’s offer as recently as late October, you know.

It was an opportunistic move by Microsoft to snap up a battered company at its weakest moment. That Yahoo wiggled its way out of the Redmond Death Grip is impressive. In the short term, I’m sure Yahoo stock is going to get hammered, shareholder lawsuits will be filed and the pain of the Microsoft ordeal will linger a while.

But ultimately, Yahoo is much better off not being a subsidiary of Microsoft. Yahoo is a much, much stronger online brand than MSN (as represented by MSN.com, Live.com, Hotmail.com, MSNBC.com and whatever else makes up the mishmash of Microsoft’s online presence), and Microsoft is the poster boy for the futility of just throwing money at the Internet.

Microsoft has been growing its online business of late, and also growing its online losses. In the first quarter of 2008, Microsoft did $843 million in revenue and lost $228 million in their online segment. Yahoo, by the way, did $1.8 billion in revenue and made $121 million in the quarter.

Why, then, would Microsoft be a better owner of Yahoo? They wouldn’t. Microsoft just has plenty of cash on hand ($26 billion in cash equivalents) and thought they could pick up a great online asset on the cheap. And it would have been a hell of a nab for Microsoft, but ultimately “Yahoo - A Microsoft Company” would really sell short the Yahoo potential.

Having been a part of the kind of b.s. company outlook presentation Yahoo put together (PDF) to counter Microsoft’s advances, I don’t buy the “look how big we’ll be!” make-believe numbers, but Yahoo is right that the market under-values the company right now.

And the reason is this - all of the focus these days is on search advertising. Yahoo has poured a ton of time and money into their Panama ad platform with little effect against the Google machine, and that failure is what Wall Street has focused on. Microsoft, as well, has failed to put a dent in Google with its Live Search and AdCenter platforms.

Google has won web search as we know it. Period. Fighting that battle has been very bad for Yahoo, and it’s time to wave the white flag. With $50 billion in revenue and net income of $14 billion a year, Microsoft has the ability to continue the fight should they chose, but Yahoo needs to get out.

The logical move for Yahoo now is to syndicate Google AdSense for Search. Not outsource their search engine; just kill Panama and serve AdSense ads instead. An informed hypothetical effect of such a move:

- Say Yahoo now earns $50 per thousand queries (which is probably a high estimate) and their net margin after development costs, administrative costs, etc. of web search and Panama is 25% (what Google nets).

- Say using AdSense, Yahoo would see $80 per thousand queries (a reasonable estimate), get a 75% rev share (also a reasonable estimate) and have administrative expenses at 5% of their Google net. Then spend another 30% of that net on search engine development.

The Yahoo DIY model would net out $12.50 per thousand queries, while the AdSense syndication would net out $39.90 per thousand queries. Throw some conservatism into the estimates and it’s a safe bet that Yahoo could double its net search revenue while getting out of the losing game of chasing Google. Using my hypotheticals and ComScore search data, it seems plausible that Yahoo could add somewhere around $1 billion in net income per year just by getting (back) on board the Google train.

There is, of course, the anti-trust consideration. In a practical sense, Google (through its own site and its many, many syndication partner sites) currently has about 68% U.S. market share for search, with Yahoo probably holding about 23% - 24% with its sites and partners, and Microsoft picking up the remaining 8% - 9%. So if you’re arguing against a Google / Yahoo deal, you’d say essentially that Google would end up with 90+% market share. Of course, if you’re arguing against the deal, you’re probably Microsoft, which holds a 90+% market share in operating systems.

Adding Yahoo would obviously be a huge market share gain for the AdSense platform, but Google is already the ad provider for AOL (No. 4 in web search), Ask.com (No. 5), the web portals for Comcast, Verizon, AT&T, Cox and most other major ISPs, CNN.com, MySpace, NYTimes.com, LATimes.com, etc. etc. You get the picture - Google is web search advertising.

Would the Trust Busters really block a service agreement (not an equity stake) between Google and Yahoo because of AdSense market share concerns? Maybe, but it seems like a stretch to block a non-equity contract between two companies. Akamai is pretty dominant in the content-serving business, so are they going to be denied big new contracts because of “anti-trust” concerns?

I have to think the anti-trust hurdle is one Yahoo could clear on an AdSense deal with Google. The actual combination of the No. 1 and No. 3 display advertising companies and No. 2 and No. 3 companies in total online audience probably would have been a bigger anti-trust concern. And Yahoo’s long-held position as the king of online content is at the heart of its real value.

Even having lost a lot of luster during its “Hollywood” years, Yahoo is a stellar online content brand. Their future promise lies not in fighting Google, but in building online audience and monetizing well through display ads. If they had been focusing on that instead of chasing after movie deals and search advertising for the past several years, they would be in much better shape today.

When they’ve done smart things (like buying Flickr), they’ve managed to totally screw up integration after the fact. I guess they’re working on that now, but a real sharp focus is needed on re-crafting the Yahoo product set. The company was barely over its Semel Hangover when the Microsoft bid hit, so it’s going to take a while to really right the ship.

Once tightened up, Yahoo will be in a great position to fight the next online revenue battle - targeted display advertising that yields much higher CPMs. Google, of course, has taken note with its DoubleClick acquisition, and AOL is raising eyebrows with its Platform-A program.

Again, had Yahoo recognized earlier that search was lost, its focus could have been put on the next battle - one it was once in a dominant position to win. But Yahoo is about on par with AOL in terms of its display advertising network and dominates inventory on its own sites. Be smart, focus on the right things … and for God’s sake get a real CEO in there. Jerry Yang stopped being CEO the first time a year and a half before Yahoo reported having 155 employees (including 44 “surfers”) and generating $19 million in revenue. And he’s the guy to turn around a troubled $7 billion company? Please.

Yahoo is full of potential, but given their miscalculations and missteps over the last five years, their potential remains just that. The company could be the Google of Display Ads 2.0 if they start doing things right, or it might get picked up by Microsoft next year for half the offer they just turned down. I’ll be interested to see what the fate of Yahoo is now.

I’ve been tinkering around with things on my new Wordpress install, and one of the tweaks I just rolled out was changing the default behavior of the “link” button in my post editor to add ‘target=”new”‘ to the end of URLs I’m linking to. Simple enough tweak (look for quicktags.js in your wp-includes/js directory, kids), but the lack of this as a configuration option hints at the disdain for “target=new” among the Lords of the Internet.

If you don’t know, “target=new” in a link makes that link open in a new browser window, rather than in the window you’re currently looking at. And for many minds absorbed with Internet propriety, that’s just wrong. It’s not quite on the level of “breaking the Internet” (I cherish my freedom …), but it’s widely viewed as “bad user experience”.

But I challenge that notion when it comes to pages referenced in content. Navigational links; links to original sources at the end of an article, blogrolls, etc. - sure, the good user experience is sending folks along and away from your site. It’s been perceived that “bad actors” use “target=new” or “target=_blank” to keep their site alive in your browser even after you’re done with it. And that’s probably the case a lot of times.

Within the context of an article, however, that logic often falls apart. I’ll reference this Wired blog post about Google & ComScore as an example if you’d like to follow along.

Wired links to five outside sources in this rather short article, with each link providing some background or context to the topic at hand. It’s good context and just linking over to previous Wired pieces or outside data or opinion provides quick and easy reference without having to dump a lot of background information, quotes, etc. into the article.

Presumably, the reader has come to the article to read the article. Reference links invite the reader to leave the article and visit the linked content. Having links open in the same window requires the reader to use the “back button” functionality to return to the article they were reading. Using the “target=new” attribute requires the reader to switch back to the original tab or window to return to the article. Neither is an ideal experience, but I would argue that keeping the original page open is a preferable flow. In any case, I don’t think “target=new” is the evil monster some would make it out to be, and in the world of connected content I’d like to see it embraced a bit more.

Ideally, the reference links would appear in such a way as to not disrupt the reader’s flow in the current article. Perhaps something akin to the rather annoying and generally useless Snap Shots functionality some sites such as TechCrunch are in love with is a model, but it’s difficult to display much more than images in a way that makes sense in less than a full-window view.

Not long ago, online content was a series of silos. Newspaper articles republished online would rarely include in-content links, and there was so little original web content out there that linking between pieces wasn’t an issue. That’s changed, of course, so I think more thought is needed on how to best flow users through interconnected content.

From last Thursday’s Oregon / Arizona game, a nice poon fight captured in the stands by ESPN. Slowed to 1/15th speed with blow-by-blow account and set to Loretta Lynn & Jack White’s “Portland, Oregon” (Yes, I know the University of Oregon is in some city that’s not Portland - song just works great with the clip):

The fine folks over at Fanblogs have brought to light some fantastically bad “journalism” on the part of CBS college football talker Spencer Tillman. Basically, Tillman has no idea what he”s talking about; saying Tommy Tuberville used to be an assistant coach at LSU and things like that. One might think people who are paid to talk about college football might be able to write accurately about it, but whatever. What gets me as a media observer is the CBS Sportsline simply changed the content of Tillman”s piece to be accurate (in the part others pointed out was wrong) without any note that the original content was unbelievably wrong.

The content in Google”s cache reads:

Coach Dennis Franchione at Texas A&M is counting the days. Tommy Tuberville, who is a constant winner at Auburn, could be in line at either Texas A&M or LSU. LSU fans that still harbor distain for Tuberville might be wise to consider his 5-2 record against Alabama. And, we all know how important that game will become for the foreseeable future. Tuberville still has a house near College Station and was an assistant at LSU.

While live on the site is now has:

Coach Dennis Franchione at Texas A&M is counting the days. Tommy Tuberville, who is a constant winner at Auburn, could be in line at either Texas A&M or LSU. LSU fans that still harbor distain for Tuberville might be wise to consider his 6-2 record against Alabama. And, we all know how important that game will become for the foreseeable future. Tuberville still has a house near College Station and has a key assistant, Will Muschamp, who is familiar with the “LSU” way, having served as defensive coordinator from 2001-04.

See? Spencer wasn”t wrong about that at all!

Props to the writer in Huntsville who called Tillman on his basic non-understanding of facts and shame on CBS Sportsline for just brushing over the errors and correction with nary a note about information they originally published being laughably wrong.

Oh, and while you”re at it CBS, Tillman also says this:

Les Miles is probably headed for Michigan because Lloyd Carr is likely to hang it up at year”s end (despite an impressive seven-game recovery after an 0-2 start). Miles” contract allows for one out: the Michigan job.

But what I understand from numerous published reports (easily found through Google) is that Miles has a clause that says if he leaves for any job other than Michigan he owes LSU $500,000, but if he leaves for Michigan he owes LSU $1.25 million.

I think you may have a factual error there. CBS, you might want to change that - and not tell anybody you did. And somebody might want to double-check the rest of the “facts” Tillman has laid out.

From what I understand through browsing RSS headlines, the Associated Press today released a ranking of NCAA football teams based on the opinions of a set of sportswriters. I haven”t looked at it, because it”s meaningless. From the headlines, I”ve gathered that USC is ranked 1 and LSU is ranked 2, but so what? The Associated Press poll lost all of its relevance two years ago when the AP took itself out of the BCS formula. The AP ranking simply does not matter now.

Yet newspapers and TV network still use the AP ranking as context when they compare teams and promote matchups. That happens, I suppose, because these organizations are all members of the Associated Press. I imagine member media outlets are likely required to make the AP poll their main reference for rankings.

The only full-season human poll that matters is the USA Today / Coaches Poll, which is part of the BCS formula. When talking about Top 25 teams, that is the poll I reference for the simple fact that it”s the one that matters. I don”t particularly like the Coaches Poll (or, more precisely the Sports Information Director / Graduate Assistant / Anybody Other Than The Actual Coaches Poll) and put zero stock in pre-season polls. The herd mentality of human polls means teams ranked high to start the season have an unfair advantage through the season.

Whatever differences exist in the AP and Coaches polls now will fade away through the season as the two groups of biased humans try to get their polls aligned to add “validity” to the results. When the first Harris poll is released mid-season, it will no doubt mirror the AP or Coaches poll. The human Harris voters don”t look coldly at results and competition; they look at the existing rankings in the other human polls. That”s the flaw of humans, and the biggest flaw remaining in the BCS.

As loyal readers of The Wisdom know, I”m a big fan of Alton Brown and Good Eats (although the current season is kind of disappointing. Whole fish? No thanks. Didn”t even watch that episode). And I enjoyed the heck out of the first season of Feasting on Asphalt, Alton”s motorcycle tour / eating show.

But the first episode of Feasting II left me puzzled and hugely disappointed in Alton and the gang. Feasting II is a culinary motorcycle trip up the Mississippi River (on land, of course), which should yield a bounty of food and culture, at least until they reach Memphis. Episode 1 took the crew from the mouth of the Mississippi to just north of New Orleans, a slam dunk for a food show if there ever was one.

They blew it. Completely.

First of all, except for post-production voice-overs, Alton goes out of his way to not call Katrina by name. What”s that about? Driving from Venice to New Orleans, they show shots of land-bound shrimp boats and wrecked buildings, but only talk about the storm in vague phrases like “a very nasty lady” and “a little storm they had here a few years ago.” Strange, but whatever.

So the team rolls into New Orleans at dinnertime, and their restaurant of choice? Mulate”s. That”s right, Alton picked a tourist Cajun restaurant as his showcase of New Orleans cuisine. On the show, they”re surprised to find that the place is packed with tourists and decide they need a new plan. Alton announces that he has “the name of a place” that”s supposed to be “real” but it”s “not listed”. Unfortunately, they can”t find it and end up eating tourist Cajun food in the street.

How the hell do you plan a food show trip to New Orleans and end up at Mulate”s (which Alton couldn”t even pronounce - it”s MU-lots, not Moo-la-tays)? We”re talking about America”s great culinary city here. As hard as it can be to figure out what”s open when in the post-Katrina world, this is a professional production by a supposed student of culture and cuisine. Inexcusably lame.

Alton also doesn”t seem to understand that Louisiana isn”t sweet tea country. It”s not the South, Alton, it”s Louisiana.

The other place Alton visits in New Orleans is Big Fisherman on Magazine Street. OK, it”s a local place, but it”s also Cajun. And not that the Atchafalaya wouldn”t make for a darn fine road trip, but this is New Orleans. Go to Central Grocery and show the world a real muffaletta, head over to Franky & Johnny”s for some “yat lunch or, hell, head over to Cooter Brown”s. Anything would have been better than following the trip to the Cajun tourist trap with another Cajun place … and then splitting town.

Alton gave the nuanced and complex New Orleanian food experience the shaft, and he should know better.

The rest of the episode was pretty good, as they got out of New Orleans and found some good … Cajun food in Vacherie and … Cajun andouille sausage and hog”s head cheese in LaPlace.

Episode 2 premieres tomorrow night, and they”re headed toward Baton Rouge. Maybe they”ll find some Cajun food there.