Yahoo Explains the Rejection

CEO Jerry Yang explains to shareholders why Yahoo rejected Microsoft's acquisition bid.


Yahoo Sends Letter to Shareholders Over Microsoft Bid

Yahoo CEO Jerry Yang cited the growing online advertising market and his company's position to take advantage of that growth as reasons for shareholders to reject Microsoft's acquisition bid, he said in a letter to shareholders Wednesday.

The letter, the contents of which Yahoo made public Wednesday, stated that Microsoft's February 1, US$44.5 billion [b] unsolicited takeover offer was too low. Yang said that Yahoo is the most visited site in the United States, held the top position in online display advertising, and counted almost one out of two of the world's Internet users as its members. He also said Yahoo is the top mobile destination in the U.S.

Yang did not cite sources for most of his claims. However, comScore Networks research from November 2007 confirmed Yahoo's online display advertising leadership, with almost 19 percent of the market.

The online ad market is expected to grow from $45 billion last year to $75 billion in 2010, Yang said, and that Yahoo wanted "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."

The company plans to grow visits to its properties "by 15 percent per year over the next several years," although did not specify how. He also said that Yahoo's own search marketing system, Panama, along with two 2007 acquisitions -- Right Media and Blue Lithium -- would "complement and enhance Yahoo!'s existing capabilities and will make it easier for advertisers and online publishers to buy and sell advertising online."

Both Yahoo and Microsoft have struggled to compete with Google's success in online advertising, specifically its paid search and Adwords programs. Based on the same comScore data, Microsoft captured only 6.7 percent of online display ads. That poor performance is seen as the main impetus behind its move for Yahoo.

The letter made no mention of talks with News Corp. for some sort of share swap, intended either to offset Microsoft's interest or force the software company to boost its bid for Yahoo, as reported late Wednesday in The Wall Street Journal.