Yahoo: Take the News Corp. Deal

By Clint Boulton  |  Posted 2008-02-13 Print this article Print


After Yahoo supposedly had no viable white knight to rescue it from the clutches of Microsoft, the company appears to be in discussions with Rupert Murdoch's News Corp. to discuss combining MySpace and other News Corp. online properties with Yahoo, according to the Wall Street Journal and blogs such as Silicon Alley Insider and Techcrunch.

Given that Microsoft appears poised to launch a more attractive offer, it might be in Yahoo's best interest to take this deal.

News Corp. would get a 20 percent or greater stake in Yahoo. The deal, designed to fend of Microsoft's original $44.6 billion bid, has been bandied about for the last year and a half but has not come to fruition due to disagreements over the value of MySpace.

News Corp. says it's worth $6 billion to $10 billion, which is bizarre because Microsoft's stake valued Facebook at $15 billion. Somehow MySpace, which has more than double Facebook's users, isn't doing something right to make money.

Ironically, ad king Google is supplying the ads on MySpace, so perhaps we have them to blame (Google execs did say they were having a hard time monetizing ads on social sites). 

In short, the more valued MySpace is, the greater the stake News Corp. gets in Yahoo. Whether it's Microsoft or News Corp., Yahoo is going to lose control. The question: Does it want to become Microhoo or retain much of its brand?

If it capitulates to Microsoft, it will likely get digested, potentially with some of its valuable assets (such as the Zimbra collaboration tools) spit out like gristle too tough for Redmond's stomach to suffer.

If it gets in bed with News Corp., it will give up some control, but it will get to have MySpace, whose 140 million users would be another healthy chunk of consumers for the Internet portal to get using its services.

With MySpace, you would have a substantial social networking arsenal along with your Flickr and properties, not to mention the new, home-cooked oneConnect mobile service that integrates your social networks with e-mail, text and instant messaging.

One big kink off of cuff: If Yahoo takes such a deal and controls MySpace, does it seek to supplant Google as MySpace's primary ad supplier? That might not mean much now, but in the long run, people will be making big bucks from social network advertising.

If such a deal is on the table, even it has to give News Corp. 25 percent, Yahoo should take it. Yahoo has rejected Microsoft's offer seemingly out of hand, and now the software giant is preparing to up its bid. Before long, additional shareholders will weigh in and Microsoft will woo them.

This is a gamble, but I like Yahoo's chances with Murdoch a lot more than with Microsoft.


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