Yahoo CEO Jerry Yang mailed a letter to Yahoo shareholders yesterday (full text below), explaining why he dinged the Microsoft bid. The letter has some small but notable differences from the one he sent to Yahoo employees explaining the same thing. So what does this tell us about the Microsoft deal, Jerry, and Yahoo?
Content: None. Jerry said almost exactly the same thing in his email to Yahoos (albeit in a different order). We still don’t buy Jerry’s argument that the $31 offer “substantially undervalues” Yahoo, but whatever–he has to say that. Otherwise he’ll spend the next five years giving depositions.
Stylistic: Huge! Jerry uses standard English when communicating to shareholders–instead of the no-caps style he uses when writing to Yahoos. This sheds light on why Yahoo is in its current predicament:
- Jerry views Yahoo shareholders as serious adults and Yahoo employees as, well, Yahoos.
- Jerry wants to be liked by his troops and regarded as a nice, cool colleague who doesn’t have a fat head on account of being CEO. These are all admirable qualities on a personal level, but CEOs occasionally need to be hard-assed bastards–especially when taking on Steve Ballmer and trying to turn around a fat, complacent company.
- It’s taking Jerry time to transition from being “cool, beloved founder” to “Nails-for-breakfast, straight-talking general who would rather be admired and feared than liked.”
This says much about Jerry’s value and values as a human being, but it also unfortunately says much about why his “hundred day plan” ended with such a whimper–and, thus, why Yahoo finds itself with so few good options other than hitting Microsoft’s bid.
On February 1, 2008, Microsoft made an unsolicited proposal to acquire your company. As much has been reported in the press recently, I wanted to reach out to you personally to let you know why your Board of Directors, after a careful review by Yahoo!’s management along with our financial and legal advisors, believes that Microsoft’s proposal substantially undervalues Yahoo! and is not in the best interests of our stockholders.
Most importantly, I want you to know that your Board is continuously evaluating all of Yahoo!’s strategic options in the context of the rapidly evolving industry environment, and we remain committed to pursuing initiatives that maximise value for all our stockholders.
We have a unique combination of strengths
— Yahoo! is one of the most recognisable and admired brands in the world. We have over 500 million users (nearly 1 out of every 2 internet users worldwide). In the U.S., we are # 1 in many of the most used online services including personalised home pages, mail, news, music, shopping and travel. Because we have leadership positions in so many indispensable online services, users spend more time on Yahoo! sites than anywhere else online.
— Yahoo! is an attractive partner for marketers. Yahoo! is #1 in online display advertising, which represents 90% of the advertising inventory on the web, and we are also a leader in search marketing and a pioneer in the growing fields of mobile advertising and online video advertising. Through Yahoo!, advertisers can now connect with consumers on our owned sites as well as those of our growing network of partners including eBay, Comcast, AT&T, a consortium of over 600 newspapers, Forbes.com, Cars.com, WebMD and more.
— Yahoo! has the financial flexibility to execute our plans, thanks to our healthy cash balance, which exceeded $2 billion as of December 31, 2007, and our substantial operating cash flow, which we expect to grow double digits in 2009.
— Yahoo! has made important investments in our core computing infrastructure enabling us to dramatically increase the speed of our search engine updates even while handling vast and growing quantities of data.
— In addition, we have the added value of our substantial, unconsolidated investments in Japan and China. We have substantial positions in Yahoo! Japan, the leader in its market, and Alibaba, which is strongly positioned in China, a market with enormous growth potential.
These assets–our brand and its audience, our relationships with marketers, our financial strength, our technology, and our strategic investments–are the core of our value and our leadership position in the industry.
We have a huge market opportunity – and are uniquely positioned to capitalise 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.
We are executing our strategy – and making headway
We have taken significant but disciplined steps to refocus our business on our objectives to become the starting point for the most consumers and the must buy for the most advertisers and enhance Yahoo!’s long-term performance.
Starting Point Objective: Our goal is to grow visits to key Yahoo! starting points and properties, where users enter the Internet, by 15% per year over the next several years. We are the most visited site in the U.S., and we continue to grow – we experienced double-digit growth in U.S. users in 2007 on our Yahoo.com home page.
In addition to traditional starting points on the PC – including our home pages, mail, My Yahoo! and search, we are particularly excited about our growth prospects in mobile, the biggest emerging starting point in the world. Globally, there are twice as many users of mobile devices as users of personal computers, and mobile advertising is projected to grow substantially in the coming years. We have an important competitive edge as the number one mobile destination in the U.S., and we are building a superior mobile experience for Yahoo! users globally so we can further capitalise on this opportunity.
Must Buy Objective: We are working to make online advertising easier and more effective for marketers, opening up new ways for them to connect with consumers. We’ve successfully completed the global roll-out of our search marketing system, Panama, which improved the search experience for our users, boosted returns for our advertisers, and increased revenue for Yahoo!. Last year, we bought Right Media, an exchange that enables buyers and sellers of online advertising to come together. Another 2007 acquisition, Blue Lithium, brings us best-in-class performance marketing capabilities, complementing Yahoo!’s existing offerings for advertisers. We also integrated our search advertising and display advertising sales forces, creating a one-stop shop for all of advertisers’ online marketing needs. All of these – Panama, Right Media, Blue Lithium, and our combined sales efforts – complement and enhance Yahoo!’s existing capabilities and will make it easier for advertisers and online publishers to buy and sell advertising online.
We are also creating a unique and valuable network of premium websites to serve our advertisers. We are making it easier for our advertisers to provide interesting and relevant offers to our users by combining advertising space on Yahoo!’s owned sites with that from a growing group of premium partners including eBay, Comcast, AT&T, a consortium of over 600 newspapers and many others.
As we reach more users both on our own websites and on the sites of our premium partners, and better monetise the ad space on Yahoo!’s owned and operated sites, we are striving to increase the percentage of total online advertising demand we touch from an estimated 15% in 2007 to 20% over the next several years.
These key strategies will be enhanced by our adoption of new, more open technology platforms that will encourage the development of new applications and the involvement of third-party developers – and help enrich the user experience.
We have accomplished a great deal in a very short time – and we are focused on building this momentum
Today, Yahoo! is a faster-moving, better-organised, more nimble company than it was just a few months ago. We have redeployed our resources to drive Yahoo!’s key strategic priorities – taking important steps to streamline our organisation and close down or scale back businesses that don’t support these critical growth initiatives. The fact is that we are well on our way to transforming the experiences of Yahoo!’s users, advertisers, publishers and developers – an important shift that is at the heart of our plan to create stockholder value.
I want you to know that the Yahoo! Board of Directors and management team remain committed to pursuing initiatives that maximise value for all our Yahoo! stockholders. This is a great company and we are moving quickly to make it even better.
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