Ever since Microsoft made its initial $44 billion bid on Yahoo several weeks ago, the venerable search engine has desperately tried to rebuff the software giant’s advances. From behind-the-scenes bargaining with other companies to announcements that the deal vastly underrates Yahoo, CEO Jerry Yang has been working to keep his company from being purchased by the monolithic monopolist. Read on for his latest move.
The short version is a press release. The long version is an investor’s presentation – 35 pages in .pdf format – that Yahoo filed with the Securities and Exchange Commission. Both versions present a much rosier future for the struggling search engine than most analysts would have you believe.
Can you imagine a Yahoo that doubles its cash flow and increases its revenues by more than 50 percent in just three years? Without Microsoft buying it out? Apparently Yang can. I have certainly been wrong before but, not to put too fine a point on it, I’d like some of whatever Jerry’s having.
How exactly does Yahoo propose to accomplish this? That extra money is not going to come from search advertising, where Google leads the market. Yahoo projects that it will come from display advertising, including banners and videos. While this area has traditionally been one of Yahoo’s strengths, it has lately proved vulnerable to other web publishers, most notably social networking sites such as MySpace. Yahoo’s plan calls for growing faster than the market in an effort to take back lost share. That could work – if it doesn’t lose any more search advertising to Google.
But to achieve this goal, Yahoo needs to pull some very ambitious numbers. It expects to sell $8.8 billion in online advertising in 2010, an increase of $5.1 billion over 2008. Yahoo thinks it will pull this off by increasing its advertising sales by 11 percent in 2008 – and 25 percent in both 2009 and 2010. It is almost as if Yahoo is saying “What recession? What’s all this talk about a bubble bursting? That doesn’t apply to us!”