:: Media Viper ::

Microsoft has reported that talks with Yahoo are over and there will be no formal merger. Microsoft wanted to buy only Yahoo Search in the latest round of discussions.

The Yahoo Board of Directors felt that this was not the best deal for it’s shareholders and rejected the idea of selling off only the Search side of their business.

There are also reports of Microsoft wanting to have regulators look at the Yahoo Google search deal that has been stuck, based on Anti Trust laws.
Microsoft took this same tactic with Google / DoubleClick which only extended the timeline to get the deal done with the Government looking into the deal a bit more.

Ballmer is beginning to look like a baby with his actions.

More to come!

Microsoft Drops Hostile Takeover Bid!
Steve Ballmer & Microsoft have packed up their bags and gone and let the building or bidding!Microsofts boss yesterday decided to abandon his $42 billion takeover of Yahoo! After initially raising their offer by $5 billion Friday to $33 a share - and having it rejected again by the Internet icon’s CEO, Jerry Yang. Jerry denied the initial bid of $29.00 as well.

“Despite our best efforts, including raising our bid, Yahoo! has not moved toward accepting our offer,” Ballmer said in a letter to the Yahoo! CEO.

“After careful consideration, we believe the economics demanded by Yahoo! do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal.”

Negotiations over the price of a possible deal began Friday between the two companies, sources said. Ballmer indicated that he was willing to pay $33 a share but Yang insisted his company was worth $37 a share, or nearly $5 billion more.

Sources have stated that Ballmer had contemplated dropping the bid since early last month after being rejected twice by Jerry Yang & Yahoo’s board of directors.

Most investment analysts and shareholders believed that there was little chance that Microsoft would walk away from the offer and Yahoo! shares traded up nearly 10 percent Friday to $29.70 in anticipation of a deal over the weekend.

The move may be terrible for Yahoo which stands to lose more than $15 billion in market value when the stock markets open tomorrow. Some large investors including hedge funds, were discussing throwing out the Yahoo! board themselves and trying to sell the company to Microsoft.

Many see this as a daring move if Microsoft is really gone for good. “There is no way that Yahoo! gets away with this,” said one large shareholder. “Yang is toast.”

Bt dropping Microsoft’s attempted takeover, Ballmer, decided not to pursue a hostile takeover of Yahoo!, something the CEO had promised when the Yahoo! board missed Ballmer’s deadline eight days ago.

Ballmer said Yahoo!’s promise to enter into a search agreement with Google, the No. 1 search company, would have made Yahoo! “undesirable as an acquisition for Microsoft.”

The deal, which would allow Yahoo! to carry Google ads, “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,” Ballmer said in the letter.

“This would also fragment your search advertising and display advertising strategies and the ecosystem surrounding them,” Ballmer added. “This would undermine the reliance on your display advertising business to fuel future growth.”

The takeover, had it been successful, would have recast the power structure of the Internet by forming a more formidable rival to Google, the leader of the $41 billion paid search business.

Yahoo! had hoped its new search technology, called Panama, would help shrink the gap between Google and itself, the No. 2 company in search. But Panama was a disappointment and Google’s dominance over Internet advertising remains.

Yahoo Becomes an Adsense Publisher For Two Weeks!

Good morning readers - One of the first to have the announcement MediaViper.com notes that Yahoo said Wednesday, that they will begin a test running Google ads alongside Yahoo.com’s organic search results.

The two-week trial run of Google’s AdSense for Search service will be limited to no more than 3% of Yahoo search queries, & will not include the company’s network of affiliate or premium publisher partners.

The move leads to speculation that Yahoo is trying to forge a stronger alliance with Google.com which Yahoo hopes will increase efforts to resist Microsoft’s hostile takeover attempt. The move was made following discussion the two companies held about Yahoo potentially outsourcing search ad sales to Google.

Yahoo basically becomes a publisher of Google Adsense yet unlike the rest of us Adsense publishers, likely to earn a majority of the revenue generated within any arrangement.

In announcing the ad test with Google Wednesday, Yahoo re-stated that thier board members are continuing to review their options to maximize stockholder value, including exploration of potential commercial business ventures.

Yahoo also went on to say “the testing does not necessarily mean that Yahoo will join the AdSense for Search program, or that any further commercial relationship with Google will result.” Yahoo also said it would not comment further on the nature or timing of any potential relationship.

Microsoft, just a week ago warned that it would lower its offer price if Yahoo didn’t come to an agreement on the proposed merger, within three weeks time, and immediately raised antitrust questions about Yahoo’s ad test with Google.

“Any agreement between Google & Yahoo would consolidate over 90% of the search advertising market in Google’s hands,” said Microsoft in a statement. “This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo.”

U.S. Sen. Herb Kohl (D-WI), chairman of the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights, voiced his thoughts on the Yahoo - Google venture, further vindicating Microsofts stance.

“We will be following closely the results of the short-term test alliance between Yahoo and Google,” he said in a statement. “Should there be moves to make this agreement permanent, we will examine it closely in the Antitrust Subcommittee to ensure that it does not harm competition.”

Yahoo’s board of directors has rejected Microsoft’s $31-a-share offer as “substantially undervaluing” the company, in its response Monday to Microsoft’s ultimatum. In exploring alternatives to a Microsoft acquisition, Yahoo has had discussions about a possible deal with companies including News Corp. and Time Warner Inc.

Two sources, paidContent and Silicon Alley Insider were reporting late week that Yahoo is in serious talks with Time Warner, which may see a Yahoo-AOL merger agreement which could be announced as soon as next week. A Yahoo-Google search partnership would only sweeten the deal, with Google already owning a 5% stake in AOL. Whether that deal will actually come together remains unclear.

Yahoo could possibly see its’ ad trial with Google, will push Microsoft to boost its offer price. Earlier on Wednesday, a large Yahoo investor criticized Microsoft for threatening to lower its bid.

Microsoft wins Facebook

In a great win for Microsoft the software giant announced Wednesday that is investing $240 million for a 1.6% stake in Facebook.com — The deal concludes that the social network is valued at a huge $15 billion. Beating out Google, Microsoft also won exclusive global rights to sell third-party banner ads on Facebook.

To put this in perspective for everyone, you know I have to toss in the reality, the Microsoft wins Facebook deal is reportedly expecting a profit of $30 million on revenue of $150 million. So the $15 billion valuation is based on earnings of just 10% of that amount.

A lot of people were thinking Google would win this one but Microsoft has an agreement to sell ads on Facebook in the U.S. since August of last year so it seemed they were in the pocket already. Another smart move by microsoft was to expand the agreement internationally because 60% of Facebook’s nearly 50 million registered users live outside the USA.

Microsoft believes that user base is on track to exceed 200 million and eventually 300 million members, said Kevin Johnson, president of Microsoft’s platforms and services division, during a conference call Wednesday.

On the call, Johnson downplayed what one analyst called the “faddishness” of Facebook. “Figured with [Facebook’s] monetization opportunities,” said Johnson, “you could very quickly get to the valuation” of $15 billion.

Analysts agreed that whatever Facebook’s prospects, social networking can no longer be considered a fad. “These are seasoned companies making well-thought-out investments,” said Gartner analyst Andrew Frank of the deal.

As you may know Microsoft owns a branded social networking offering, “Windows Live Spaces,” which has attracted an audience of 9.8 million, according to comScore.

Johnson said he was pleased with Microsoft’s ability to monetize Facebook’s network thus far, but that there are “many initiatives underway to drive that higher.”

Owen Van Natta, Facebook’s vice president of operations and chief revenue officer, did allude to Microsoft’s recent acquisition of aQuantive, saying the deal was “a deep strategic move for them.”

With this latest victory, Microsoft still faces an uphill battle against Google in the war for online ad dollars. In its fiscal year ending in June, Microsoft’s online ad revenue rose 21% to $1.84 billion. During the same period, Google’s ad revenue totaled $13.3 billion.

It seems this is also another shot at Myspace which was once the dominant social network but it seems first to market in the social networking space may not have been the best idea given the amount of negative press they were under initially.