Clinton Outspent By Obama Online

HILLARY CLINTON'S CAMPAIGN CAME UNDER fire for spending extravagantly after disclosing it had dished out $25,000 for luxury rooms at the Bellagio in Las Vegas and $100,000 on party platters in Iowa, among other expenses last month.

But in spending on online social media and advertising, Clinton was easily outstripped by Democratic rival Barack Obama. Not a big surprise, given that Obama has run the most effective online campaign among the 2008 presidential candidates. Of the $32 million he raised in January, for example, $28 million came from online donors.

Even so, figures in the candidates' latest spending reports covering January underscore the gap in their online efforts. The Obama campaign paid more than $89,000 to Google and $18,252 to Microsoft for online advertising and a total of $32,372 to Yahoo and Yahoo Search Marketing. Obama paid another $23,564 to Yahoo subsidiary Right Media, an online ad exchange which handles mainly remnant advertising.

A further $1,821 went to Facebook, where Obama has attracted more "friends" than any other candidate, and $88,540 went to political consulting firm Blue State Digital.

The Clinton campaign, by contrast, reported only a $13,674 payment to Google during the same period.

Kelsey Group: Interactive Ad Revenues To Reach $147 Billion Globally By 2012

INTERACTIVE ADVERTISING REVENUES WILL INCREASE significantly from $45 billion in 2007 to $147 billion globally in 2012--representing a 23.4% compound annual growth rate, according to The Kelsey Group.

Interactive advertising--including search, display advertising, classifieds and other interactive ad products--grew its share of global advertising revenues from 6.1% in 2006 to 7.4% in 2007, per "The Kelsey Group's Annual Forecast (2007-2012): Outlook for Directional and Interactive Advertising." By 2012, Kelsey Group analysts expect the interactive share of global ad spending will reach 21%.

The forecast does not include mobile ad platforms. The Kelsey Group's mobile forecast, released in September 2007, will be updated later in 2008.

The global advertising market grew to just over $600 billion in 2007. The firm expects global ad revenues to grow at a CAGR of 2.7% and reach $707 billion in 2012, propelled in large part by considerable growth in the interactive segment.

"It's no surprise that the global advertising industry is experiencing a full-scale shift to mixed-media platforms, with interactive driving a significant share of overall industry growth," said Matt Booth, senior vice president, Interactive Local Media at the Princeton, N.J.-based Kelsey Group, in a statement. "We see Internet development--including increased subscriber/user access and broadband penetration--as a driver of both interactive advertising revenue as well as migration of traditional ad spending to new media platforms."

During the forecast period (2007-2012), the U.S. will see interactive advertising revenues grow from $22.5 billion to $62.4 billion (22.6% CAGR), with interactive revenues in Canada increasing from $1.3 billion to $3.3 billion (21.3% CAGR).

Global directional advertising revenues--including local search, print and Internet Yellow Pages--will grow from $33.3 billion in 2007 to $41.4 billion in 2012. Local search revenues will grow from $2.1 billion to $6.6 billion (25.5 percent CAGR).

Google Expands AdSense For Video, Sets Deals With Tremor, YouMe, Others

IN A BID TO ACCELERATE its role in the burgeoning online video advertising marketplace, search giant Google this morning is announcing a slew of deals expanding its AdSense for video beta. To date, the AdSense program has focused mainly on enabling Web publishers to serve text-only ads. The video beta version, enables publishers to serve targeted, contextually-relevant video graphical ads and text overlays, and is seen as an alternative to the pre-roll an post-roll advertising clips that have become the industry's default standard advertising format.

Google has been working on ways to expand its reach into video ever since its $1.65 billion acquisitions of YouTube in 2006, and recently began accelerating its role in TV advertising sales, as well, via its AdWords For TV program, which enables advertisers to buy addressable TV advertising on cable and satellite TV systems.

Early this morning, Google announced deals with the Tremor Media and YouMe video advertising networks, two of what are expected to be several partnership deals for its AdSense for video expansion (Both American sites).

Tremor said it has incorporated "one-click integration" of Google's contextually targeted ads into its dynamic ad insertion platform, Ad-inStream, for publishers in Tremor Media's network to accept targeted Google AdSense for video advertising formats with only a check-box.

According to comScore, Tremor Media provides access to consumers through their network of more than 800 aggregated sites that reach 94 million unique users every month. Publishers across Tremor Media's network can now support traditional text overlays through Google's AdSense for video beta, providing contextually targeted advertising by leveraging a video's metadata.

In addition, Tremor will also support InVideo graphical and rich media overlays that aid advertisers with a consistent brand message across their traditional display advertising as well as emerging video ad formats.

Microsoft targets Web with Yahoo or alone: Gates

Microsoft Corp plans to invest heavily in Web search to compete against Google Inc, even if it fails to acquire Yahoo Inc, the company's chairman Bill Gates said on Monday.

Gates, who called Microsoft's offer for Yahoo "very fair", said Google is the only company with "critical mass" in Web search. Microsoft needs a bigger piece of the market to create a more competitive and profitable Web search business.

"We can afford to make big investments in the engineering and marketing that needs to get done. We will do that with or without Yahoo," said Gates in an interview with Reuters.

"But we also see that we'd get there faster if the great engineering work that Yahoo has done and the great engineers there were part of the common effort," said Gates, who is Microsoft's biggest shareholder.

The two companies are at a stand-off in Microsoft's $41.7 billion unsolicited bid to acquire Yahoo. Microsoft has offered to buy Yahoo for $31 a share in cash and stock, a bid which Yahoo's board rejected, saying it undervalued the company.

Microsoft countered by saying its offer was "full and fair," but did not say what it planned to do next. Analysts expect Microsoft to sweeten its bid, possibly to $35 a share, to clinch a deal.

"There is nothing new in terms of the process. We've sent our letter and we've reinforced that we consider that it's a very fair offer," said Gates, who remains the public face of Microsoft, even though he plans to switch to a part-time role at the company in June to focus on his philanthropic work.

Microsoft's stock has fallen 13 percent since its offer for Yahoo, reducing Microsoft's offer price to $29. Yahoo shares closed at $29.66 on the Nasdaq on Friday, indicating that investors expect Microsoft to raise its bid.

Pressure is on Jerry Yang

Yahoo's Jerry Yang appears to be facing even more of an uphill battle to fend off Microsoft than originally thought.

Some of the company's board members, including Chairman Roy Bostock, are among those who are pressing for a merger, according to the New York Post. Reportedly, the pro-MicroHoo faction believes that Yang is rebuffing Microsoft more for emotional reasons than sound business strategy.

The company's official story is that it rejected Microsoft's $31 per share offer because it "substantially undervalues" the company -- even though the offer was for 62% more than Yahoo was then trading at.

"We have a huge market opportunity -- and are uniquely positioned to capitalize on it. The global online advertising market is projected to grow from $45 billion in 2007 to $75 billion in 2010. And we are moving quickly to take advantage of what we see as a unique window of time in the growth -- and evolution -- of this market to build market share and to create value for stockholders," the company said in a letter to shareholders this week.

But some say it's personal for Yang; he doesn't want to see Redmond swallow the company he co-founded in 1995. In fact, his distaste for that prospect is so strong that Yahoo is now considering deals that seemed unlikely only a few weeks ago, including tie-ups with AOL, News Corp. and Google.

Still, some board members are apparently ratcheting up the pressure to sell, and avoid the avalanche of shareholder lawsuits that will follow if Yahoo permanently rebuffs Microsoft and its stock then plummets. In fact, Yahoo's rejection of the $31 a share bid has already sparked one lawsuit, filed earlier this week by the retirement fund Wayne County Employee's Retirement System of Michigan.

Decision Time For Yahoo

The dust is settling on Microsoft’s $31 per share offer to acquire Yahoo, and the options left open to the company are fairly well understood at this point. There will almost certainly be no White Knight or other buyout offer coming to the table - the sorry state of the debt markets is assuring that.

Yahoo was hoping for a competing bid, any competing bid, if only to boost Microsoft’s offer to the $40 range. With no competing offer, Microsoft has no need to increase what they’ve put on the table. That means it’s decision time for the Yahoo board of directors.

They can take Microsoft’s offer. Or they can try to do a deal with Google to outsource their search advertising and boost cash flow. They can also do nothing, but that would likely result in a flurry of shareholder lawsuits for a breach of fiduciary duty. Doing nothing isn’t an option for Yahoo’s management and board.

As has been widely reported, Yahoo could increase its cash flow by an estimated 25% if it surrendered to Google and handed over its search advertising business. That could give them enough of an excuse to turn down Microsoft’s offer. To outsource search advertising to Google, though, would be a huge hit to Yahoo’s pride. It’s an implicit acknowledgment that the years of work that went into Yahoo’s Panama project to revamp their search advertising platform was not enough - they still can’t compete with Google.

Of course, the hit to Yahoo’s pride will be worse if they sell outright to Microsoft, the dreaded enemy of Silicon Valley.

It’s not clear that the DOJ would approve either deal, although on balance the Microsoft deal is probably more likely to create a competitive environment. Google could be a very dangerous company without any competition whatsoever in the search advertising space.

For its part, Google probably wishes Yahoo had put up a little more of a fight over the last couple of years and wasn’t in this position. They are making so much money in the current marketplace that anything that disrupts it is worrisome. Sure, getting Yahoo’s search business would be great - they take out a competitor and get more market share. But they would have to give Yahoo the lion’s share of gross revenue. And they are so dominant already that any further gains risks the attention of the U.S. and E.U. governments. A merger between Microsoft and Yahoo is a worse outcome, mostly because the sheer volume of searches and page views the combined company would control could actually produce a viable competitor.

The status quo suits Google just fine, which is of course why they are arguing for it. And this is where Google and Yahoo’s interests are suddenly in alignment. If for some reason the DOJ decides the Microsoft-Yahoo merger is a bad idea and gives it a thumbs down, then Yahoo can stay an independent entity (for now) and avoid those shareholder lawsuits (blame the government!). Meanwhile, Google can keep their money machine rolling.

Whatever happens, the salad days for Yahoo are long gone. 2008 will be the year Yahoo ceased to be one of the big independent Internet heavyweights. They’ll almost certainly become an operating subsidiary of Microsoft, or Google’s whipping boy. And if by some chance the government puts a stop to either deal, they’ll have a short reprieve before facing similar decisions next year or the year after. The world is an unforgiving place. Yahoo is cute, cuddly and likable, but they did not execute the way Google did. And because of that they are quickly turning into collateral damage in an epic war that is really just beginning between Microsoft and Google.

Why The Yahoo-Microsoft Deal Will Be a Disaster

I found this interesting reading...

Why The Yahoo-Microsoft Deal Will Be a Disaster

Why will Microsoft-Yahoo be a disaster? Three reasons:

1. Pre-Deal Purgatory.
Even if Yahoo agrees to the deal tomorrow and everything goes smoothly, it will be almost a year before the transaction closes. The regulators won't block the deal, but they'll take a hard look at it--especially in the EU and especially after Google goes on the lobbying warpath to pay Microsoft back for the latter's efforts to block Google-DoubleClick.

A lot will happen in a year, and neither Yahoo nor Google will sit still. Yahoo's strong people will be bombarded with offers, and even with a big pool set aside for retention bonuses, will be foolish not to consider them. Who knows what will happen when the companies merge? Microsoft could immediately whack 30% of Yahoo's workforce. The same anxiety and turnover will infect Microsoft. How can Microsoft's Internet people be sure that Yahoos won't suddenly be put in charge? Microsoft's Internet division already plays second fiddle to Windows and Office. Who's to say the homegrown Internet folks won't be fingered as "redundant"?

Innovation at both companies will also be stifled: Who wants to launch risky new products when they and anyone associated with them might suddenly be eliminated by a new management team? Amid the uncertainty, the most important priority for every employee who wants a senior role in the combined entity will be to figure out who will survive and where the survivors' loyalties lie. Meanwhile, Google will be steaming full-speed ahead.


2. At Microsoft, the Internet division will always be subservient to the Windows and Office cash cows. Steve Ballmer knows which products butter his bread. So does everyone else who works at Microsoft. Steve and Microsoft may also know that, somewhere down the road, Google and "cloud computing" threaten these products, but there's a difference between knowing that a competitor might eventually disrupt your business and actively disrupting it yourself.

Put differently, there is a fundamental difference between the way Google and Microsoft approach the Internet:

- Google wants to use the Internet to build a huge business (and, in the process, kill Microsoft--a mission that may end up becoming an Ahab-like obsession)
- Microsoft wants to use the Internet to protect its already huge Windows and Office businesses.

One strategy is offensive, the other defensive. At Google, every exciting new idea that undermines Microsoft's core business will be rushed into production. At Microsoft, every exciting new idea that undermines Microsoft's core business will be killed (or, at least, delayed).

Microsoft wants a combined Yahoo-MSN to succeed, it has to give it the freedom to destroy Windows and Office. As long as the entity is under the same corporate roof as Windows and Office, this will never happen. (And in that reality lies the secret to a successful merger: Combine the assets, but keep them as a separate company)

3. No company can do everything, and Microsoft is already fighting too many wars.
Once the deal is complete, Microsoft will have 80,000 employees. It will be competing with:
- IBM, Oracle, SAP, Salesforce.com
and dozens of new software-as-a-service providers in enterprise software:
- Apple, Sony, Nintendo, Research in Motion in consumer gadgets, gaming, and PC platforms, and
- Google, Time Warner, Comcast, AT&T, and others in media, advertising, and technology.

Each of these business requires different skills, relationships, strategies, and expertise. Each faces strong, focused, rich competitors. The difficulty of winning wars on all these fronts at the same time is one reason Microsoft's Internet division has been sucking wind for the past 13 years (the other reason is the one above--it's a small sideline business for Microsoft).

Some argue that Microsoft will do just fine in all these businesses because it will become a new-age GE: a digital conglomerate. This is wishful thinking. GE is a successful conglomerate because it has been a conglomerate for almost a century--owning and operating different businesses is its corporate DNA. Microsoft's corporate DNA, meanwhile, is not just a single business but a single product: Windows. Almost everything the company does is designed in some way to leverage the fantastic power of that platform. (Even XBox, which Microsoft has approached brilliantly, is a vehicle for extending the Windows paradigm into the living room).

Microsoft, in other words, doesn't want to be GE. It wants to be the operating system for the digital world. It doesn't want to buy Yahoo because Yahoo is in an exciting business with strong growth potential. It wants to buy Yahoo so Yahoo can help "transform" Microsoft's business--i.e., make it more competitive with Google.

Google is indeed a threat to Microsoft, but so are Oracle, Apple, IBM, RIM, and a host of other companies. Microsoft is right that all these businesses are converging and that is possible that one company will end up capturing the lion's share of the value chain. But whether or not Microsoft buys Yahoo, Google is in a far better position to become The One than Microsoft.

The Bottom Line:

Google has built its entire business around cloud computing. Microsoft is trying to transform its entire business to avoid being killed by cloud computing. Yahoo or no Yahoo, the history of business (including Microsoft's) makes it crystal clear who's the favorite to win this war.

Wow Weeeee

A DEAL THAT WOULD consolidate the Internet's No. 1 destination, Yahoo, and its fifth largest, MSN, Microsoft this morning made a bid to acquire Yahoo for a record-setting $44.6 billion. The deal, if completed, would mark the largest yet in the ongoing consolidation among the Internet's big bodied players, and would once again reset the playing field for online advertising industry. Regulatory considerations aside, the deal would seem to be a good "take out" offer to Yahoo's shareholders. At $31 per share, Microsoft's bid represents a 62% premium over Yahoo's current stock value. Based on Thursday's closing price of $19.18 a share, Yahoo's market capitalization was $25.63 billion, according to Yahoo Finance.

"Can't imagine being short and waking up to this - yikes!," one member of Yahoo Finance's message board posted this morning. "Today's price may hit $40 as shorts try to flee a burning building," posted another. "Time to short [Google]! Yahoo will kill them," posted a third.

Microsoft's offer couldn't be timed better from that third perspective, coming hours after Google released disappointing fourth quarter results, among a freefall in the search giant's share value in recent weeks.

If Microsoft's offer is accepted, and passes regulatory hurdles, it would combine highest trafficked Internet destination, Yahoo, with its fifth largest, MSN. Google's sites currently rank second. That would obviously be a boon for a combined Microsoft/Yahoo online display advertising business, building mass at a time when the online ad market appears to be fragmenting at a breath-taking pace.

It also would be a boon for Microsoft's position in the lucrative search advertising marketplace, which is currently dominated by Google. According to comScore's year-end 2007 analysis of the major online search entities, Google dominated the marketplace for U.S. search activity, amassing 5.629 billion queries in December 2007 vs. December 2006, a 30% increase. Yahoo totaled 2.211 billion search queries during the same period, down 4%, while Microsoft had 940 million, up 8%.

While the merger would help close the gap and make a combined MSN/Yahoo a more competitive search player vs. Google, comScore also noted that Google held a 56% share of the more than 113 billion core searches conducted in the U.S. during all of 2007.

The proposal already is winning fans on Wall Street, including influential JPMorgan analyst Imran Khan who advised Yahoo shareholders accept the offer, noting, "Increased advertising scale could drive upside

"One of the biggest challenges facing MSN and potentially Yahoo! is the lack of scale in terms of search traffic compared to Google. We believe that a potential combination between the two companies could solve this issue and close the gap with Google from a search inventory and advertiser perspective," he observed. "On a global basis, MSN/Yahoo! could reach approximately 600M unique users and have approximately 28.3% of all searches. Further, we believe the increased scale of the combined search entity would lead to improved monetization due to a number of advertisers, which positively impact coverage, click-through rates, and pricing. Global Standing Should Improve: MSN is the second largest player in Europe behind Google, with broad-based strength spread across a number of countries, while Yahoo! is very strong in Asia, especially in Korea and Taiwan and through joint ventures in China and Japan. A theoretical strategic event between MSN and Yahoo! could create a competitor with strong market share across North America, Europe, and Asia."

But the deal has implications well beyond the current search and display advertising markets. In his offer letter to Yahoo's shareholders, Microsoft CEO Steve Ballmer, emphasized:

"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."