API (Arrogant Pricks, Inc.)

Okay, J.Yang @ Yahoo! and your buddies of the bored board,

I hear you've received a letter from API(publicly traded as MSFT) indicating they'd like to buy you out. I understand it's a hostile takeover of sorts, and it's either sell yourself to the devil, or get sued so many times over that....that it just would have made more sense to sell yourself to the devil.

Pity. Chances are that you're probably going to have to sell. But- there's a wee little glimmer, and if you can capitalize on that window, then who knows...you might just live to see another day. At any rate, make no mistake that you have built up a wonderful company, which is, very unfortunately, has reached the end of its life-cycle, and the only options for you are to either breathe a new lease of life into your company, or submit to your grave(publicly traded as MSFT).

Okay- ignore the rest of the filth-flarn in Ballmer's letter to you. What he really means is that he's a big bully, has a big pocket, and is willing to be obnoxious to extreme limits, in order to convince your shareholders that this deal is the only way to preserve their interests.

Your obvious come-back to this should be to convince your shareholders that in fact, NOTHING could be further from the truth. This will, in fact, give your current shareholders stock in a company that has just about started to dig its own grave, because API has absolutely no clue about where they go next. And in fact, they're just as f-ed as you are. Their cash position, built up over the years for times like these, is their life-support system, and it can only last them so long.

Once you have your shareholders' attention, you will then need to hammer out two things:
a. That the grand plan proposed by API(publicly traded as MSFT) is actually a big box of crap.
b. You have a better plan in the works.

Here's how-

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a. Big box of crap:
#1: "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....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."

You see, Ballmer has one goal, and one goal only. He's livid at Google's success, and very raw that the house that Jack(..Bill..) built wasn't ready to stay alive with the entrance of the simplest of ideas...a search engine that just works.
This is fact, and take little validation.

It follows, therefore, that Ballmer's 'vision' of aligning Yahoo! and MSFT to create a more effective competitor in the online space has been flawed, for over 2 years now(since he first pursued you). The only thing that will compete with Google's search domination is a de-fragmented bunch of 100+ startups, each of which will focus on a core market niche and perfect the art of search in that niche.
And here's the kick.....if Ballmer was to wait out another 2-3 years, and keep aside $10 million on average for each, and get a half decent acquisition strategy in place, he'd have spend about $43 billion less than what he's going to spend, in buying you.

#2: "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. "

Okay, this one should be an easy retort for you. I'll even spell it out.
"AS online advertising growth continues, there are significant opportunities in micro-targeting economics, in partnering up with vertical ad-platforms, to form a sinew that powers the clearly visible divergence in the Internet economy.
And all due respect, but screw convergence."

#3: "-- 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."

Scale economics are typically harnessed and touted in order to offset the resulting (financial) value to consumers(in this case, advertisers and publishers).

Your response to this:
"Advertisers are not(we repeat, ARE NOT) looking for a cheaper way to deliver ads. They want more efficient system of targeting and delivering ads, so their click-through-ratios go up, giving them a better bang for their advertising dollars.

Publishers, on the other hand, want to make the most they can, via ad-placement along side their content. Their big problem isn't how much money they can make from content that's on their site, but how much MORE money can they make by letting their content travel freely across the Internet via syndication and edge distribution. "

Yeah Jerry, tell API about RSS and ask them what their plans are for the edge-conomy.

#4. "-- 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."

Tell him to stop with the 'single', already.
There is not going to a 'single index' and a 'single platform' for much longer. He's still thinking PC vs. Mac, and that game, compared to the Internet game, is very apples 'n oranges.

And because I know of some fine folks in your ranks, I know that R&D is the real reason API(publicly traded as MSFT) is after you. Your brains are brilliant and your management has failed them.
API feels like moving your brains under the roof of another management, is going to "unleash" "innovative" "breakthroughs" in the marketplace.

Your mantra here should be that adopted by FSJ when it comes to Ballmer: SIOOMA(Suck It Out Of My Ass).
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That's all layman talk. But the point here is that this big box of crap stinks so bad that even the layman can smell it out halfway across the world(quite literally..!!).
Let your smart shareholders in on this smelly proposition, will you?

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b. Better plan:

Here's the juice guys. You're still the good guys, in my book. You've done a lot of things right, and you've actually built something of value. But, like I mentioned earlier, and like a lot of people have been telling you(Umair Haque, Sramana Mitra, and plenty else), you're in a period of strategic decay, brought along by the nature of the corporation that you've built. It sucks, but it's true.

I can't tell you what you should do, or list out what you've done wrong. It's going to take me a bloody long time, and in all fairness, I think it's you who that exercise should belong to.

But as a way forward, I think you should begin by making a statement which explains how jumping into a big bag of crap will only accelerate your decay. Remember, your shareholders are YOUR shareholders, and it is YOUR responsibility to create value for them. That you haven't been able to do so over the last few years is to your disrepute, and maybe you do deserve a few lawsuits for your negligence.

It's time now, however, for you guys to 'fess up to your mistakes, and stop uttering meaningless bull crap("Our job at Yahoo! is to make your life easier") to save your skins. It's stupid, disrespectful to your shareholders' interests, and not a progressive mindset. And bull crap like that will get you deeper into quagmire, not pull you out of it.

Second, stop with the corporate re-structuring, firing, layoffs, etc. Come up with a plan for what you will do at Yahoo!, and then come up with a plan for how you're going to do it. Brownie points are some of the few things your brand still holds in favor with a lot of people, and by making yourselves look like first-grade a-holes, you're hurting yourself...every day.

Third, create a new you. I know someone that got a job offer from you guys, and then a week later, quit to go to Google. I would be shocked if that happened to me as often as it does to you. It tells me that irrespective of what I do as a company, I stink so bad as a culture, that people are not giving me 5 days of their time before moving on. So get some HR strategists together, get some focus groups together representing -all- the different parts of your business, and generate a new buzz...."Yahoo! We're (finally)listening..."

Fourth, build a vision for your company. With it will come 'character', which will keep Arrogant Pricks(and the like...) at bay. Your search sucks. Your e-mail's OK. Your portal is not comprehensive. And your portal covers too many services for you to be good at any(or even a few).
Second, your list is messy. It's not even intuitive any more....why's there a category for Fantasy Sports and then separate ones for Fantasy FB and Fantasy MLB?

If you ask me, I'd say start with "Green". Make these your core focal points, partner up with Google on search, and with others on the rest. (YouTube for video, CNET for Tech, maybe an open source client for chat(Gaim), etc.

That is, if you really think the others are worth pursuing.

See, if you aren't doing simple things like these, and carefully examining each of your service offerings at a granular level, how do you possibly determine what your overall company strategy ought to be?
I'm a Yahoo.com regular, and I know that the only noticeable change that happened on your front page in the last 2 years is that the menu option for "more Yahoo services" is now an Ajax popup menu.

Back then, I was excited, that perhaps this was the beginning of a new Yahoo! and that even though you guys were behind Google(they'd evangelized DHTML/Ajax before you), you had, at least, gotten the message that the new Internet was around the corner, and you were gearing up to do big things that would show us an exciting range of possibilities.

It's now two years since, and Google Labs(http://www.google.com/labs/) is re-inventing the world, and Yahoo Labs(http://research.yahoo.com/) is busy churning out PDFs.

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Yahoo!- NOW'S THE TIME TO PUT UP A FIGHT. And before you conquer the world, you need to conquer yourselves. It's a process, and it's going to take you some effort. This fight is not about you staving off Ballmer and Microsoft. It's about you renewing your commitments to your shareholders, because they're not just here for your money. They are there to participate in the creation, development, success and growth of a new empire. I bought Yahoo! shares when you announced Project Panama, but then it was delayed, and I sold, at a loss, just because it didn't seem worth it to me any more to invest in a company that announces ONE big thing, and then fails to deliver on it many months after it was expected to.

But I like you guys...I knew you before I knew the 'Page boys'.
And I'm willing to invest again.

Just make me a plan. And show me the money!!