ON YAHOO!, FACEBOOK, AND MEDIA IMPATIENCE

EGG 'EM ON

Blood is in the water. The Wall Street Journal today now gets in on the Yahoo! bashing game (see yesterday's post).  Here's how the article kick it off:

"YAHOO REMAINS in talks with Facebook, but hasn't reached a deal, illustrating its slower pace of expansion compared with Google."

So let's see now.  If Yahoo! doesn't buy Facebook quickly, with the media holding a gun to it's head as it were, it's a sign of how it's expanding slower compared with Google.  The writers then re-phrase and repeat to make sure their point it not lost on the reader:

"Yahoo's failure to date to secure a deal for Facebook highlights the slower pace of its efforts to expand, following Mountain View, Calif.-based Google's swift agreement to purchase online video site YouTube..."

It's not enough to say the talks are proceeding, but it's now "Yahoo!'s failure" that the talks are not proceeding as fast as someone would like.  What's not clear is fast enough for whom exactly...folks close to the seller perhaps?

The piece then offers some justification for why Yahoo! should hurry up and spend a billion dollars or more already and buy Facebook:

"A Facebook acquisition would give Yahoo a flagship property in the social-networking area, further extending its reach to younger users coveted by advertisers. Last year, media giant News Corp. bought social-networking site MySpace for $650 million."

Wow, had totally forgotten about THAT acquisition.  Thanks for the reminder.

One even gets the sense that a party interested in Facebook selling at a high price is a source for the article:

"Facebook's business picked up over the past month after the introduction of some new features on its site, making the company more confident about its prospects, say some of the people familiar with the matter."

Other than these bits of well-timed quotes, there doesn't seem much in the way of new information since the rumors of a Yahoo!/Facebook acquisition surfaced in another WSJ piece by the same writers last month (see my post on that article here).

Observers of the internet industry are quick to point out "bubble valuations" and "bubble era" when large transactions occur. 

What's often not as well understood is how the mainstream media plays an integral role in their manufacture.

Comments

[Yaser Anwar]

Michael your spot on!

Yahoo is facing so much media pressure to do a deal that like you I'm worried. Google has a lofty stock & 10 bn in cash whereas Yahoo just has a 34bn market cap and not nearly as much cash.

An overpriced acquisition would lead to a disaster for Yahoo coupled with the recent problems it has been facing with Panorama search delay & not to mention loosing ground in the search business.

Yahoo has operating margins of just 17-8% whereas GOOG has around 34%, the Facebook acquisition could help it bolster the earnings but 1 has to keep in mind Facebook's deal with MSFT for advertising.

I hope Yahoo doesn't give into the pressure & figures out a way to calm the media & investors.

[Justin Smith]

Michael,

Facebook may have more leverage with the way their numbers have been looking in the last month. If you're interested, I wrote about that this morning at Inside Facebook.

-Justin