It's nice to see that VentureBeat is moving up the Pundit Watch leaderboard. Pundit Watch is a service by hubdub.com that tracks predictions made on various things and gives them a stock-like value which cashes out when the prediction is right or wrong.

I wrote up some of its strengths and weaknesses previously here.

VenutreBeat is now #2 on the list thanks in large part of many correct predictions about the Apple announcements recently. We finally passed that pesky Perez Hilton.

Now if only I got bonus points for my ParisLemon predictions... #2 is looking particularly good at the moment:

2) Microsoft and Google's next big battle will be over who gets the rights to purchase at least part of Yahoo
While many are still waiting for Yahoo to turn around, it seems to be increasingly questionable as to if they can. I don't think they'd want to sell completely but perhaps take an investment injection such as Apple did from Microsoft many years ago and Facebook did recently from Microsoft. If Google were to win this, look for Microsoft to push for more anti-trust hearings. If Microsoft wins, look for Google to buy a half-dozen other companies Microsoft wants but won't sell to MS.

#15 is looking pretty good now as well:

15) GPS will be all the rage in consumer goods
Cars, cellphones, cameras. Parents tracking kids. Boyfriends tracking girlfriends. Someone tracking all of us - but we'll call it something more friendly - 'geotagging'. Of course the iPhone will gain GPS as well.

[Update]: VentureBeat is now #1!

I already posted a pretty long piece on the whole Twitter/FriendFeed bitchmeme going on, entitled "The only thing Twitter has to fear, is Twitter itself", but I could go on and on about this for a long time.

I understand the convention behind the FILL-IN-THE-BLANK-COMPANY is going to kill FILL-IN-THE-BLANK-COMPANY - hell, I use it too sometimes, but I really think those who feel FriendFeed is going to kill Twitter are missing the point of both services.

Twitter does one simple thing: provide 140-character updates, messages, links, etc - FriendFeed does another: pull in your data from various sites, allow for conversations about said data. True, you can post to FriendFeed, and that is sometimes very useful, as FF clearly realized it could be when they first tested it out with FestivusFeed as a joke, but FriendFeed simply does too much else to make it useful in a way that Twitter is currently used.

I am happy that FriendFeed has caught on enough that such a conversation can take place. As I said last December in questioning why more people aren't using it:

I'd be surprised if FriendFeed doesn't catch on in 2008.

That is proving true. As is the comparison I made back in October after FriendFeed first launched in beta to Facebook's News Feed, which is now trying to do part of what FriendFeed does -- and I wouldn't be surprised if it soon adds the ability to comment on Feed data.

All this debate about FriendFeed and Twitter would be over in a second if Twitter would just goddamn work already. I'm still holding out hope for one of my 17 predictions for 2008, that Yahoo will buy Twitter (#16). Those two need each other right now. Wouldn't it work great with FireEagle too? Come on Yahoo, do it.

Some of you may recall several months ago when I made fun of the name of Yahoo's new location-based application Fire Eagle. Tom Coates, who came up with the name, left me a comment on the post stating:

"As the person who came up with the project and the code name, I can reassure you that we're not going to be launching with Fire Eagle."

Despite the definitive words, Tom was nice enough to come back a few months later with an update possibly to the contrary:

"Just to confuse things a little, I should now perhaps add that it may in fact be called Fire Eagle after all! Thanks for the kind words about the project though..."

Well guess what? The service was announced this morning at ETech complete with the name Fire Eagle.

Though very bare-boned at the moment, the idea behind Fire Eagle looks to be a solid one. Matt did a good write-up of it at VentureBeat.

Yahoo let me in to the beta and was nice enough to give me some invites to pass out. I've got three left, the first three folks to leave me their email addresses in the comments will get em.

Come ride the Fire Eagle with me.

[UPDATE]: They're all gone already, but I'll let you know when I get some more.

Yahoo has yet another service they are launching (or rather re-launching) despite all the Microsoft takeover talk, Yahoo Video. This follows the launch last week of their new live streaming video site, Yahoo Live.

This update to the video site is coming a little bit later than expected, Bloomberg reported last August that it would be ready to go by the end of 2007, but it's here now and looking nice. The site is currently running very fast and features a widescreen ratio video player - as opposed to YouTube's more old-school television-esque box model. This widescreen ratio and launch timing also seems to coincide perfectly with the release of the Indiana Jones and the Kingdom of the Crystal Skull trailer (which I wrote about yesterday).

The player itself looks very nice, trim but not too sleek - the 'Info' and 'Share' buttons seem very responsive. I also really like the fullscreen capabilities, which still allow you to browse other videos, get info, and share all without leaving fullscreen mode if you wish.

Also of note is the look of the site. Dark blues, grays and silvers are apparently the new standard colors - this could this indicate that Yahoo is trying to move away from their signature purple - which the previous iteration of Yahoo Video used extensively.

Perhaps the biggest story from my perspective though is something not yet included, but alluded to by the site: Flickr Video. You'll notice in the bottom area a section called 'More With Video', in this list you'll find a link to 'Share your stuff on Flickr' - which is interesting seeing as Flick of course currently has no video capabilities.

It's been known for a while that Flickr Video is coming - and reconfirmed over and over again - but they have sure been taking their sweet time with it. If Yahoo Video is going to be their more YouTube-esque site, perhaps Flickr Video will be exactly as I predicted as my #5 prediction for 2008:

5) Flickr will launch its video service - but it won't be meant to directly compete with YouTube
While this has been said to be coming for a while, I think the smart move by Flickr would be to make this service less about entertaining videos and stick with what Flickr does best, landscapes, home videos, etc.

The Official Yahoo Video Blog has more information about what is new and improved about the service.

It's been relatively quiet the past 24-hours from both the Yahoo and Microsoft camps in terms of the hostile takeover - too quiet. TechCrunch and Silicon Alley Insider appear to know at least half of the reason - Yahoo is in the midst of ongoing discussions with News Corp. about a potential counter offer to rival Microsoft's.

Such a deal would involve News Corp. spinning off Fox Interactive Media (MySpace's parent) to be a part of Yahoo and News Corp. giving Yahoo a large cash infusion - the total package being worth around $15 billion. In exchange, News Corp. would own upwards of 20% of Yahoo, making them the largest shareholder in the company.

This would be beneficial to Yahoo for a couple reasons, the first of which is obviously that they would remain independent (though with a new minority owner in News Corp), and second this would apparently be a better deal money-wise than Microsoft's. News Corp's package would put Yahoo's total value north of $50 billion rather than the $44.6 Microsoft is currently offering.

The main problem in such a deal, as TechCrunch notes, is that Yahoo may still have to outsource its search marketing to Google to make the numbers work. While all parties involved would likely be very happy to do that - the FTC might have something to say about it. However with three huge companies with some of the smartest minds in the world working for them, I wouldn't be surprised if they were able to come up with some sort of arrangement that makes the numbers work and wouldn't necessarily draw the ire of antitrust watchdogs.

I foresaw such a three-way deal taking place 10 days ago:

Or perhaps Google could try to funnel money to someone like News Corp. so they can put in a bid - News Corp. does seem open to someone buying into MySpace, and Google has a large ad-deal with MySpace...

Perhaps News Corp. could send MySpace Google's way rather than Yahoo's and in exchange Yahoo could take control of advertising across FIM (which Google isn't doing a great job at anyway apparently). Who knows, it's really just thinking out loud at this point, there are a million things that could go down.

This is all starting to read very much like sports teams' backroom dealings leading up to the trade deadline. The NBA is famous for its huge multi-team deals - perhaps Yahoo/News Corp/Google can pull one off. I think Yahoo would take draft picks and expiring contracts at this point.

Microsoft has now officially responded to Yahoo's rejection of their takeover proposal - the gist? As I suggested yesterday: 'Yahoo, you are being stupid, don't you see how much money we can make? We're going hostile.'

It is unfortunate that Yahoo! has not embraced our full and fair proposal
to combine our companies. Based on conversations with stakeholders of both
companies, we are confident that moving forward promptly to consummate a
transaction is in the best interests of all parties.

We are offering shareholders superior value and the opportunity to
participate in the upside of the combined company. The combination also
offers an increasingly exciting set of solutions for consumers, publishers
and advertisers while becoming better positioned to compete in the online
services market.

A Microsoft-Yahoo! combination will create a more effective company that
would provide greater value and service to our customers. Furthermore, the
combination will create a more competitive marketplace by establishing a
compelling number two competitor for Internet search and online
advertising.

The Yahoo! response does not change our belief in the strategic and
financial merits of our proposal. As we have said previously, Microsoft
reserves the right to pursue all necessary steps to ensure that Yahoo!'s
shareholders are provided with the opportunity to realize the value
inherent in our proposal.

It's good to see that Yahoo isn't simply sitting still under the weight of all the Microsoft acquisition talk - following last week's Y! Live launch, we now have their new tech investing web show Tech Ticker.

The official introduction post promises the show will be "both quirky and opinionated", which you can probably tell from their opening paragraph which lays out the tech world as a sector that's "both kick-ass and kick-your-ass - a place for big dreams, big bets and big disappointments, too. Double, halve or get out of the way."

Led by Sarah Lacy and Aaron Task, the show will also feature Henry Blodget and Andy Kessler - as well as a whole slew of other contributers from around the web, which is good to hear.

They also promise not to show any favoritism or conflict of interest towards their parent Yahoo! - which is definitely important to note given the current state of things. In fact, tomorrow should be a very interesting day to launch such a site seeing as Yahoo will be delivering their official response of "No" back to Microsoft in response to their $44.6 billion dollar takeover proposal.

According to NewTeeVee, Tech Ticker will release 4 to 8 videos each day - each video being 2-3 minutes in length. These videos will range from discussions, to mini-documentaries, to interviews. It will be on-demand as opposed to live.

This show would definitely seem to be something that is right up my alley, I'm looking forward to seeing how it turns out. They certainly have the tagline to reel me in "I Love the Smell of Profits in the Morning".


[UPDATE]: Here's the Yodel Anecdotal post on the launch.

A week ago I questioned if Steve Ballmer was in fact running Microsoft or if it was Gordon Gekko, given just how hostile the takeover bid of Yahoo could go. Well it appears we've found that Gekko within Microsoft running point on the deal - his name is Christopher P. Liddell, Microsoft's CFO.

The New York Times piece lays out some very interesting tidbits about Mr. Liddell's thoughts and motivations for this hostile move towards Yahoo - and if he has enough clout, it seems like Yahoo's rejection of Microsoft' offer tomorrow could trigger some of the real hostility in Microsoft's bid.

From the Times:

“You have to be disciplined and ruthless,” Mr. Liddell said by telephone last week, before Yahoo’s board decided to rebuff the offer. “We should see acquisitions as a way of growth. We should not be embarrassed at all.”
...

First, Microsoft is planning to crisscross the nation to meet with Yahoo’s largest shareholders in an election-style campaign, hoping they can put pressure on Yahoo’s board, people briefed on the company’s plans said.
...

Microsoft could also decide to make an offer directly to shareholders, called a tender offer, which would put more pressure on Yahoo’s board to negotiate. At the same time, Microsoft could also set a deadline for its bid, known as an "exploding offer."

And if Microsoft decides to make this a nasty battle, it could start a proxy contest to oust Yahoo’s board at its next election; it would have until March 13 to nominate a new slate of directors.

This stuff sounds straight out of Wall Street. The difference is that this isn't Teldar Paper that Microsoft is trying to take over (incidentally, Liddell came to Microsoft after working at International Paper), this is Yahoo! - a company which the public (beyond the shareholders) actually cares and knows about. If Microsoft is too hostile in its tactics they might be seen as shrewd businessmen, but also as complete assholes in the eyes of the public - which might not be the best play in the world given the public perception Microsoft already has.

Things could get very, very interesting in the next few weeks if Microsoft takes this hostile path as it appears Liddell is ready to do when Yahoo tomorrow lets Microsoft know that they aren't going to take them up on their offer.

Hell, who needs a sequel to Wall Street when you can see one play out in real life?

The point is, ladies and gentlemen, that: Greed, for lack of a better word, is good. Greed is right; greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms, greed for life, for money, for love, knowledge — has marked the upward surge of mankind and greed, you mark my words — will not only save Teldar Paper but that other malfunctioning corporation called the USA.

Quite a few people have written that Microsoft's acquisition of Yahoo! would be equivalent to the merger of Time Warner with AOL in 2000 - that is, a disaster. Certainly there are some parallels - the size of the deal is one of the largest since that AOL/Time Warner one (though nowhere near its $160 billion level - but that was an all-stock deal), and it would essentially be one giant money-making machine joining forces with a powerful, though much smaller name that was once nearly synonymous with the Internet.

However while AOL was still very much in power at the time of its merger, Yahoo! has been on the downfall the past couple years with Google rising up to take its place. It was almost right after the Time Warner/AOL merger that AOL started its historic downfall.

So it provides a kind of nice symmetry now that Yahoo! is said to be talking with AOL about a possible merger that could fend off the Microsoft bid. Can the previous cautionary tale on Internet mega-mergers save Yahoo! from being the next one?

The two have talked before, in 2006 about a possible merger, but neither side could agree on a price. However both companies are in different, desperate situations now. Time Warner has seemingly been trying forever to figure out some way to back away from AOL, while Yahoo needs to move fast before Microsoft takes its offer right to the company's shareholders - or worse, makes a move to put its own board in place.

Another key point to this deal is only briefly mentioned in the Times' piece. Google owns 5% of AOL - they actually outmaneuvered none other that Yahoo to get it in 2005, assuring their search would be used with AOL. Now Google is trying like crazy to help save Yahoo from Microsoft - you think they didn't call that company they own a share of to come up with a scenario? Hell, they could be the main players working behind the scenes on this.

While I have doubts as to whether an AOL/Yahoo merger would actually do anything to help either company long term (Allen Stern lays out a counter scenario), short term it could certainly make for a viable alternative to the Microsoft deal. But is it wise to risk the future of your company just to avoid being bought by a non-preferable buyer? We might get to see it play out in front of our eyes.

Last week as news was breaking about Microsoft's bid to buy Yahoo for $44.6 billion dollars I used a picture from The Empire Strikes Back of Darth Vader reaching out to an arm-less Luke hanging on for dear life above an abyss below. Now with the word that Yahoo's board has decided to reject Microsoft's initial offer I'm left thinking of some dialogue from that scene:

Darth Vader: There is no escape. Don't make me destroy you. [pauses] Luke, you do not yet realize your importance. You have only begun to discover your power. Join me, and I will complete your training. With our combined strength, we can end this destructive conflict and bring order to the galaxy.

Luke Skywalker: I'll never join you!

Strong words from Vader (Microsoft) as he attempts to coax Luke (Yahoo) into a partnership to take over the galaxy (Internet) - warning him that he may need to go hostile. It kind of reminds me of Steve Ballmer's letter to Yahoo on the day of the deal.

Luke's response is harsh and firm - but "never" might still be too strong of a word here. Yahoo (Luke) has not yet decided to throw himself into the abyss (Vader/Microsoft has also not yet revealed itself to be Luke's father). The Dark Side still has hope.

You see, while Yahoo is set to reject Microsoft's initial proposal, they are not expected to say that Microsoft can't come back with a sweeter one. It makes sense, as I explained a few days ago, Yahoo's stock was at the $34-a-share level as late as October, Microsoft's bid was for $31-a-share. Yes, Yahoo was at $19-a-share at the time of the proposal, but being only a few months removed from a price nearly double that - and really not all that much changing in that time, it certainly seemed like Microsoft was simply trying to work the situation (earnings down, layoffs coming, stock at a 4-year low) and get a great price.

The consensus now is that Yahoo is holding out for an offer above $40-a-share. If Microsoft were to agree to this it could add over $12 billion dollars to the original proposal, pushing it towards a $60 billion dollar offer.

In negotiations an offer starts low, the person selling comes back with a much higher price, then the offering party usually ups their offer to be somewhere in the middle. Will we see Microsoft come back with a $52-53 billion dollar proposal?

At the very least all of this is buying Yahoo more time to potentially line up other options - as they still really don't want to sell to Microsoft. Microsoft likely knows this as well, but will it annoy them enough that they take this bid truly hostile and go right to the shareholders? That's probably unlikely.

Remember, Darth Vader offers Luke to either join him willingly, or threatens to kill him. He could probably take Luke prisoner and hold him against his will simply so he won't join with the other side (Google), but Vader knows that a captive Skywalker would be a lot less useful to him - just as an unwilling and resentful Yahoo would be to Microsoft.

More thoughts:

• Google to Microsoft: No, We Said DON'T Be Evil
• Yahoo + Google: A Last Alliance of Elves and Men Against the Armies of Mordor (Microsoft)?
• Analyst Thinks Microsoft's Yahoo Bid Is a Bluff, I Think Analyst Is Foolish
• Apple Not Likely to be Yahoo's Savior
  
• Microsoft + Yahoo != Microhoo, Yahoosoft, Mahoo, Etc...
• WWY!D? What Will Yahoo! Do?
• Interwebs Tangle, Microsoft to Buy UStream.tv (rival to the new Yahoo! Live) for $50 Million?
  
• Microsoft to Yahoo: Join Us, Join Us Or Die (and here's $44.6 billion to help you decide)
  

Valleywag has the scoop that UStream.tv is said to be in late-stage discussions with none other than Microsoft about selling their service for over $50 million dollars. Other companies are said to be in the bidding as well.

While on the surface such a deal might make sense, UStream.tv is a popular lifecasting site, video is all the rage these days, and $50 million is chump change for a Microsoft that doesn't seem to blink unless it's a deal involving billions with a 'b'. But lets look at one of the other hot stories from a few hours ago: Yahoo launching Yahoo! Live, their own lifestreaming service - which they clearly put a lot of effort into.

If Microsoft is confident that Yahoo is going to be accepting their bid as early as tomorrow to buy them out, couldn't they just use this new Yahoo! Live that they will have paid - you know, $40+ billion dollars for?

Maybe they noticed all the overload problems Yahoo! Live was having tonight and UStream.tv is a wedding present of sorts to them?

It's a bit odd. If you're buying a big house with a brand new refrigerator that was just installed, do you buy another refrigerator?

TechCrunch is reporting that Yahoo is having a special board meeting at some point later today, the outcome of which will likely determine if this is the end of Yahoo as we know it, or if they will live to die another day. Both of the two likely outcomes look very, very bleak.

Mike Arrington believes that no one is left to offer up a competing bid and the only option besides succumbing to Microsoft is to strike a deal with Google to outsource its search and advertising - thus castrating the Internet giant. Short term this would give Yahoo some extra revenue, but long term analysts think this would lead to a slow death not entirely dissimilar to what AOL has gone through.

The choice would appear to between the proverbial rock and the hard place. This is no bluff.

But never discount Google. All indications are that they are willing to do almost anything to prevent Yahoo from going to Microsoft. They likely know that their deal doesn't offer Yahoo a much better alternative - and in fact has a very good chance of not even being allowed to go through - but Google is nothing if not creative.

I still would not be shocked in the least bit to see Google pull off some kind of elaborate 3rd party plan to save Yahoo in the 25th hour.

If they cannot, how can Yahoo turn down Microsoft? Yes, with Microsoft's recent stock downturn and Yahoo's upswing, the deal will probably have to be sweetened - but when you consider Yahoo's stock was at $34 as late as October and Microsoft only offered $31, it probably needed to be sweetened anyway.

As the once proud Yahoo verges on falling into the arms of Microsoft, awaiting one last miracle from Google I'm left thinking of King Theoden's speech from The Lord of the Rings: The Two Towers:

Where is the horse and the rider?
Where is the horn that was blowing?
They have passed like rain on the mountains,
Like wind in the meadows.
The days have gone down in the West,
Behind the hills, into shadow.
How did it come to this?

Theoden is saved - will Yahoo be?

On the night of the deal my summary was basically Microsoft saying to Yahoo: Join us or die. By the end of tomorrow it might be: All your base are belong to us.

Analyst Trip Chowdhry of Global Equities Research thinks Microsoft's $45 billion dollar bid for Yahoo is simply a tactic to stop Yahoo from merging with Amazon. In his mind, Microsoft knows that Yahoo couldn't turn down such an offer to go with a lesser one from Amazon, and if Yahoo accepts, the government will stop the deal from going through - so it's a win-win for Microsoft, stopping an acquisition while spending no money. Except that very little of that actually makes sense.

First of all, I could see this tactic maybe (and that's a big maybe) if Google or Apple - Microsoft's main rivals - were trying to buy Yahoo, but I'm not sure that they would necessarily care if Amazon wanted to (which is also questionable by the way). A $45 billion dollar bluff seems like a bit much - even for Microsoft - especially when you consider that nearly every other analyst and expert on the matter (besides Chowdhry) thinks a Microsoft-Yahoo deal would go through.

Chowdhry's main arguments as to why the deal would be struck down all seem to be based on Microsoft's reputation for monopolistic practices in the 1990s, but this is a different ball game. Microsoft and Yahoo are both far behind Google in Search and Online Advertising - arguably the two key components in the market. While the EU would very likely give Microsoft a hard time, the U.S. government would likely look into the matter and let it go through - how does a $45 billion dollar gamble look at that point? Risky. Too risky.

Another problem with this argument is that while the $45 billion was impressive, it's probably still undervaluing Yahoo - so it's not like this was the complete end-all deal. As recent as October, Yahoo's stock was near $34 a share. When Microsoft made the bid, Yahoo was at $19 (around its 4-year low), and so Microsoft's bid was $31. This means that 3 months ago such a bid would have been an insult - I know that Yahoo is off track, but not that much has changed in 3 months; Microsoft is clearly trying to get a very good deal - is that not motive enough?

Most important in all of this is that Microsoft has laid out a very compelling case for why they need Yahoo - and why such a deal makes sense. On many levels it does make sense, it is very clear now that neither company can compete on its own in the aforementioned search and online advertising markets with Google. #2 and #3 (Yahoo and Microsoft) combined would still not be close to #1 (Google), but they would certainly be closer and in a better position to compete.

If there is one thing we know about Microsoft it's that they want to compete - in everything. So a $45 billion dollar bluff just to annoy Amazon - who could, by the way, make another go at Yahoo after the FTC strikes down MSFT/YHOO under Chowdhry's scenario - doesn't make a lot of sense. How does a bluff get them any closer to competing with Google? It doesn't. But buying Yahoo does.

TechCrunch is reporting a rather vague rumor claiming that some company large enough to spend $1 billion to $1.5 billion is about to spend that much to buy some other company in the social space. Using the powers of deductive reasoning, TechCrunch has come up with either Google or MySpace buying social networking site Bebo.

Rumors of Yahoo buying Bebo came up last May for a cool billion dollars, those rumors seemingly turned out to be false as nothing came of them. Still it's somewhat interesting that Yahoo paying a billion for Bebo 9 months ago was considered a somewhat credible rumor and apparently the price tag has changed much since then. Compare this to Yahoo trying to buy Facebook for a billion dollars in late 2006 and them eventually selling a stake to Microsoft a few months ago for an amount that pegged their value at $15 billion dollars.

Of course this latest rumor could be way off as well, though Bebo did recently hire a bank to either look into selling (they claimed no) or raising more money.

More interesting I think is the prospect of Google being involved in some kind of billion dollar-plus purchase so soon after Microsoft's bid for Yahoo. Certainly a purchase of Bebo wouldn't make nearly the headlines of a Microsoft/Yahoo deal, so perhaps that is way off. Instead, maybe they are involved in a multi-billion dollar deal of some sort in order to help bail Yahoo out of accepting Microsoft's deal.

Sure it's pure speculation, but it's pretty clear that Yahoo is looking for anyway out and Google wants to help them but can't directly.

This morning after reading Google's response to Microsoft's hostile bid to buy Yahoo I wrote the following knowing it was unlikely the government would ever permit Google to buy Yahoo:

I wonder if Google won't try to work on some cash-injection/investment plan in Yahoo (similar to what Apple accepted from Microsoft right when Steve Jobs came back to the company) to try and make it so that Yahoo won't have to be taken over by Microsoft. Or perhaps Google could try to funnel money to someone like News Corp. so they can put in a bid - News Corp. does seem open to someone buying into MySpace, and Google has a large ad-deal with MySpace...

And now by mid-afternoon we have a report coming from Reuters that Yahoo is very much considering an alliance of some kind with Google so they aren't forced to accept the Microsoft bid. Such talks between the two were have said to have originally taken place months ago, but nothing came from them. The Wall Street Journal is reporting now that Google CEO Eric Schmidt has called Yahoo CEO Jerry Yang to offer his help to stop the takeover.

While some are speculating these reports along with the others suggesting Yahoo is in contact with several other media, technology, telephone and financial companies about potential counter bids could just be meant to drive up Microsoft's bidding price from $31 a share for the company to upwards of $40+ a share, there does appear to at least some truth to Yahoo especially not wanting to be taken over by Microsoft.

We already know that Yahoo turned down a private proposal from Microsoft a few days before their public one, and Yahoo is said to be very displeased with the way Microsoft has handled the entire affair. The New York Times DealBook has a great rundown of just exactly how hostile this takeover attempt is. Microsoft knows full well the intricacies of Yahoo's inner-workings and has seemingly timed this public offer perfectly so as for it to be in their favor to get done - by any means necessary, even replacing Yahoo's board.

Is Steve Ballmer still running Microsoft, or is this Gordon Gekko?

Speaking of Ballmer, if Microsoft fails in this attempt to buy Yahoo somehow, it may be time for him to go. From an outsider's glance it might make sense for Microsoft and Yahoo to become one - for both sides. It seems obvious at this point that neither will be able to catch Google on their own, so why is Yahoo so against the idea of joining with a company that can help them take down their chief competitor - to the point where they seek anyone else, and are even willing to partner with that #1 competitor? Well there certainly is still very much a 'big brother' aura around Microsoft these days despite their promises to be a more open company. It may be that no matter what they do, the image of their company will not improve until Ballmer, a very divisive figure, leaves.

Remember Microsoft is said to have actually offered more money to DoubleClick to buy them - but DoubleClick went with Google anyways. A few months later it very likely could have been this lasting memory that led Microsoft to buy a stake in Facebook that essentially put its valuation at a ridiculous $15 billion dollars - they weren't about to be underbid but lose to Google again. Now if Microsoft loses this Yahoo deal to a much smaller Google/Yahoo alliance, it would seem time for Microsoft to make some drastic changes to alter their outside perception.

I would not be shocked at all to see some soft of Yahoo/Google alliance, but it might be even more likely I think that Google indirectly helps some other company make a bid at Yahoo (as I noted in my previous post) - because an alliance may not be enough stop the hostile takeover that has been set in motion. Will Google help Yahoo somehow cut the ring of power from Ballmer's hand?

[photo: New Line Cinemas]

While I've already brought up the idea that perhaps Microsoft launched their hostile bid for Yahoo yesterday to hit Google while they were down after falling short of analysts expectations for the first time (slightly kidding) - maybe their real motive was to overshadow news that they continue to lose OS market share to Apple (slightly more kidding).

The latest numbers from Net Applications now have OS X at over 7.5% of the market. But as Apple 2.0 notes the real news may be that at the end of last month, the share was over 8% for the first time. The iPhone meanwhile continues its rise as well, capturing .13% of the market.

This data of course is far from absolute as it simply captures web-browsing market share based on 40,000 websites, but the upward trending for Apple combined with a continual downward trending for Windows is definitely worth noting.

Amid the hoopla going on over at Flickr protesting a potential takeover by Microsoft (Flickr is owned by Yahoo), I had been wondering what happens now to Flickr Video, the ever-rumored to be just-around-the-corner video service (and my #5 prediction for 2008). Dan Faber at ZDNet has an update today, and it's more of the same: it's coming in the next few months.

Stewart Butterfield (Flickr co-founder) told TechCrunch last May that Flickr Video would be coming "soon". This was reaffirmed by Bloomberg in August. It's now February 2008, and we still have no video, and the prospect of a major takeover of Yahoo doesn't seem to bode well for helping it get out the door any quicker - if it does at all now.

While Faber suggests Flickr Video would take over Yahoo Video similar to how Flickr took over Yahoo Photos, I'm not sure that would be the right approach (and Yahoo says they are still deciding how to utilize their video services). I don't want to see another YouTube competitor and as I wrote back in May, Yahoo trying to go directly after YouTube would likely be a mistake. They need to go smaller, they should make Flickr Video very much akin to Flickr itself, a place for clips that get overshadowed on YouTube - personal videos and things like scenery clips.

I hope Flickr can finally get this service out the door before the big shakeup occurs, because then who knows if we'll ever see it. As Fake Steve Ballmer notes in a comment on Faber's post, "WMV only!".

Muhammad Saleem brought up a good point today on Twitter:

"Why do people think if companies like Microsoft and Yahoo! merge, that they would pick an idiotic name like MicroHoo or YaSoft?"

I think I've read every combination of the names Microsoft and Yahoo imaginable over the past several hours short of my personal pick: Matisyahu.

Seriously people, do you really think that if this deal goes through Microsoft is going to merge Yahoo's name into theirs? No way, both are very powerful brand names, Microsoft would be foolish to rebrand themselves and they'd be just as foolish to drop the Yahoo! name from that company's services.

What is still the #1 website in terms of worldwide usage? Yahoo.com. Are people going to stop typing that in and start typing in Microhoo.com, Yahoosoft.com, Mihoo.com, etc? No. That's just silly.

When and if Microsoft buys Yahoo they will be known as: Microsoft and Yahoo. Sure maybe a few services will be branded as being "powered by Microsoft", "powered by Live", or "powered by Yahoo", hell we might even see some kind of collaborative branding on new products, perhaps something like MY (Microsoft + Yahoo) - but we will not be seeing Microsoft turn into some gobblygook name - Yahoo is bad enough as it is.

And here we go. Marketwatch and Reuters are now reporting that Microsoft has offered to buy Yahoo in a cash and stock deal worth $44.6 billion dollars.

Yes, you read that right. They are offering to pay $31-a-share for the company which would make it a large 62% increase over the stock's current price (right around $19). Obviously Microsoft does not want to be turned down, this is a very serious offer. The question now, of course, is if Yahoo can refuse it.

Yahoo has been mired in difficulties for much of the last few years. While they are still very much a profitable company and still worldwide the #1 visited site, they have vastly struggled when compared to a much newer company that came along and dominated almost every field Yahoo had either been in or tried to enter. That other company is of course Google.

In this regard, Microsoft and Yahoo share a common "enemy", though Yahoo has not had exactly the same contentious relationship with Google that Microsoft has. Now the two companies that were battling for the #2 position in many of the online fields that Google dominates in could becomes one entity and it could certainly level the playing field.

Interesting that Microsoft would do this right after Google announces their earnings and for the first time fell short of expectation. Is that the 'strike while your opponent is weakened' strategy? (In all fairness it probably had something to do with Yahoo's stock hitting a 4-year low on Wednesday as well...)

Also of note is that despite all its recent issues, lest anyone think Twitter isn't useful, I first found out about this by at least 5 different sources at around 3:30am here in California on yes, Twitter. The first one I saw was Fred Wilson's tweet.

This would potentially fulfill my prediction #2 of 2008. Lets see what's Google's response is.


[UPDATE]: Yahoo is up 60% right now in pre-market trading all the way north of $30 on the news! Microsoft might have to up that bid!

[UPDATE 2]: Here's Microsoft's announcement for a Press Conference scheduled at 8:30 AM EST/ 5:30 AM PST - Yes, Microsoft is having a press conference at 5:30 in the morning in their time zone with Ballmer and Ray Ozzie in attendance. Obviously such a deal warrants it.

The live webcast link is here.

More thoughts:

• Massive Layoffs Coming to Yahoo? They Have the Claws, Fangs, Don't Know How to Kill the Bunny
• Microsoft/Google War: Another Day, Another Win For Both Sides
  
• Yahoo Search + Del.icio.us Results = A Step Towards Crowd-Sourced Search?
• Ballmer to Web 2.0 Execs: Have a Pulse? We'll Give You At Least $50 Million For It
• People Love Rumors: Microsoft Acquiring Yahoo?
  

Last.fm today announced that starting immediately users will be able to listen to almost every album or song on the site for free. Yes, this includes all the tracks from all the major labels as well as the tracks from most of the Independents. Previously you could only stream a short sample of most tracks.

Currently this new functionality is only available in the US, UK, and Germany, but they are working to bring it to other countries as well. This gives Last.fm the largest legal collection of music online available to play for free.

Meanwhile Yahoo is said to be in talks with the major record labels as well about a new music service they hope to launch this year. While details are limited, it seems Yahoo is looking to either sell DRM-free MP3s or give them away for free as part of an ad-supported service. Obviously this last part is particularly interesting because from the wording it would seem that Yahoo isn't looking simply to stream music (which they already do) but potentially give away free unprotected MP3s.

Everyone is well aware that Yahoo needs some kind of major buzz to get out of the current funk they are in - one that could get even worse from a PR perspective if and when they announce large-scale layoffs later this month. If Yahoo can somehow broker a deal that would give users unprotected MP3s for free, that would certainly garner some buzz.

Streaming free music is nice, but being able to play it anywhere on any player for free is even better. How would Amazon (with their AmazonMP3 service) and Apple (with of course industry-leading iTunes) respond to such deals? 2008 should be a very interesting and exciting year for digital music.