Google may be slowing down.

I am no analyst; However I have interaction with large spenders on the web everyday so here is my take on this article:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/02/26/BU5VV9082.DTL

1. Spend is down 12%. Yes of course it is. The mortgage industry tanking can account for a huge chunk of this. Not just the lenders themselves, but all the affiliate partners as well are no longer advertising on these deals, and people are no longer looking for them.

2. Another thing that Google did recently was crack down on Ringtone advertisers, A piece of business that is the bread and butter for most affiliate marketers out there.

3. Regulation/Editorial Issues - It is not as easy to advertise on Google anymore. Search marketer Guerrilla tactics are becoming a thing of the past. In the end you need to be creating a targeted campaign that correlates with the messaging on your site. The affiliates are in an ever evolving war with the search engines as landing page quality, and site legitimacy become important factors. From a short term business standpoint Google is hurting themselves by negging people willing to spend money, however from a long term perspective they are trying to keep the customer happy by only showing the most relevant of ads. I think this is important as users can become rebellious when they are are being inundated with deceiving messages and are not finding what they are looking for on the engines.

4. Other Places on the Web - Its not all about text search on the engines anymore. Its about making your site a destination. As major companies start to get the picture on how to create a good web portal and engage the user folks are becoming brand loyal in a sense and know the URL to go to get what they need.
Examples:
1. When I need computer stuff i go to new egg
2. When I need plane tickets i go to Kayak and sidestep
3. When I need sports tix, craigslist or stub hub.
4. News - cnn
5. Search engine marketing news - I have my RSS portal and can see news from all my favorite blogs.

In a way the fascination with the web is over and the days of "surfing" the web are coming to an end. People have their favorite sites picked out and know where to go to find what they need. The may have clicked on ad 8 months ago for a retail site and now have mentally earmarked that site for future use.

5. Understanding Profitability - Companies are beginning to embrace the ability to measure ROI and profitability on search engines. People are no longer just throwing their whole budget into Google and three keywords without tracking. Search is being treated as a science and being approached thoughtfully.

My Theory on Yahoo-MSN Merger

I got this email from a client sort of Joking about a Google possibly buying yahoo. I don't think it would happen as it would be just as much of an anti-trust issue for Google to own MSN and therefore have 90% of the ad revenues online. But someone made the antitrust comment to me regarding MSN buying Yahoo. I don't buy this. MSN has 10% Market share of search, Google has 70. MSN going to Yahoo will once again level the playing field and maybe buy some Miracle the two can combine forces to create some pretty neat online features.

Case 1: Hotmail vs Yahoo Mail - Hotmail is the worst ever. Yahoo mail is pretty sweet since they released the new one. Gmail is cool for searching but organizationally can get sloppy. The Gmail craze is more or less a result of people pledging allegiance to the Google brand, much like MAC heads. Having a Gmail account is a sign of being an uber tech savvy type. Much like friendster met its demise by myspace, and myspace has met its demise to facebook. The same thing can happen with mail.

Case 2: I Google vs My Yahoo - Arguments can be made in favor of each as google calender is pretty sweet, but yahoo feeds and news seem to have more homey feel to their portal.

Yahoo Fantasy Sports - Anyone out there that is involved in this knows how great of a portal this is. Google has nothing like it and will never have it because people that work at Google don't like sports.

I encourage people to visit Yahoo.com and click on the stuff on the left. Those portals are pretty sweet, and very targeted, a great place for paid ads that are thoughtfully placed.

In the end when the Google hype dies down then there may be a chance for little old Yahoo to pick up the pieces. Below is the email i sent to my client in response to his Google buying Yahoo comment.

Talk around here is Google will not buy Yahoo. It is in Yahoo's best interest to side with MSN and take on Google. Google is moving into software development as well OS development. Basically they would offer free software and computer operating systems and pay for it by displaying ads. If Yahoo and MSN would combine they can gain some competitive advantage on Google and make for a stronger competitor and roll out the same free software type packages and make money by ads. As a search engine Yahoo has a chance as they have lots of neat portals and features people just need to start using them and MSN has millions of customers using their operating systems so could easily force people into viewing Yahoo ads. I really hope that MSN and Yahoo can make some stuff happen.

-p-

Microsoft offers to buy Yahoo for $44.6 billion

SAN FRANCISCO/NEW YORK (Reuters) - Microsoft Corp (MSFT.O) made a bid to buy Yahoo Inc (YHOO.O) for $44.6 billion in cash and stock, seeking to join forces against Google Inc (GOOG.O) in what would be the biggest Internet deal since the Time Warner-AOL merger.
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In its boldest-ever acquisition move, Microsoft sent a letter to Yahoo's board on Thursday night, offering $31 per share for the Internet media company, a 62 percent premium over its Nasdaq closing stock price that day. The price is still below Yahoo's year-high of $34.08 in late October. Yahoo said on Friday its board will evaluate the offer.

Yahoo shares shot up 45.5 percent to $27.91.

The world's biggest software maker is seeking a joint stand against an ever more powerful Google, whose share of the global Web search market has reached 77 percent, according to Internet audience researcher comScore. Yahoo is second with 16 percent and Microsoft was a distant third with 3.7 percent.

Yahoo would give Microsoft dominance in Web banner ads used by corporate brand advertisers. Yahoo attracts more than 500 million people monthly to a network of sites devoted to news, finance and sports as well as Yahoo Mail, the No. 1 consumer e-mail service.

"Microsoft's wanted to do things that could build up its online business dramatically," said Brendan Barnicle, an analyst at Pacific Crest Securities. "This is going to be a big bet for them. But I also think it's where they see the market going, so they really needed to get there.

"This is more than a shot across the bow at Google, because you put these two guys together who are basically two and three in search and makes them far more relevant," he added.

Yahoo said its board will evaluate the unsolicited bid. Microsoft shares, which have a market capitalization of about $300 billion, fell 5.5 percent to $30.82.

Microsoft Chief Executive Steve Ballmer told analysts on a conference call that the deal would transform its money-losing Internet division, which it sees as critical to growth, into a profitable pillar of its business.

"We have been losing money. Our plan here would be to not lose money in the future," Ballmer said.

Ballmer said Microsoft had held discussions with Yahoo "off and on for the last 18 months."

"A year ago, the management team told us it wasn't really the right time to discuss an acquisition," Ballmer said, in an apparent reference to then Chairman and Chief Executive Terry Semel, who was forced out as CEO in June. He resigned as chairman of Yahoo on Thursday, a day ahead of Microsoft's bid.

While speculation of such a tie-up has swirled in the markets for more than a year, critics say Microsoft and Yahoo have very different corporate cultures and many overlapping businesses, from instant messaging to email and advertising, as well as news, travel and finance sites.

"To me, the premium seems exorbitant, for what is a dwindling business. I personally don't see how the synergies of Microsoft-Yahoo is going to take on Google," said Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC.

Yahoo has been losing market share to Google in the increasingly strategic Web search market, and warned earlier this week that it faced "headwinds" in 2008, forecasting revenue below Wall Street estimates.

Microsoft said the online advertising market is growing rapidly and expected to reach nearly $80 billion by 2010 from over $40 billion in 2007. It added it is "increasingly dominated by one player," referring to Google. Microsoft paid $6 billion last year to buy online advertising services firm aQuantive as a bulwark against Google's growing position.

The software company said it had identified four areas that would generate at least $1 billion in annual synergies for the combined entity.

Microsoft General Counsel Brad Smith acknowledged that rival bidders could emerge, but said any attempt by arch-rival Google to acquire Yahoo would face insurmountable antitrust hurdles.

"Any number of companies might take an interest. There's one company that cannot: That's Google itself. Given its superdominant market share, Google is clearly prevented by antitrust laws from buying Yahoo," the chief lawyer said.

Mark May, analyst at Needham & Co, said that while the price is a premium to Yahoo's recent trading price, it was in line with its average trading value over the last 2 years.

"I would not be surprised to see this bid have to be raised over time," he said. "I think there are companies out there like Comcast (Corp) (CMCSA.O) and Viacom (Inc) (VIAb.N) and others that still need to address the emergence of online media and haven't. So there are clearly other strategic companies out there."

Under the proposal, Yahoo shareholders can choose to get $31 cash, or 0.9509 of a share of Microsoft common stock. The deal in aggregate must consist of one-half cash and one-half Microsoft common stock, it said.

The Microsoft-Yahoo deal would be the largest in the Internet market since the $182 billion purchase of Time Warner Inc (TWX.N) by AOL in 2001, which was seen as the worst merger in recent corporate history, with clashing corporate cultures and many of the promised synergies never materializing.

(Additional reporting by Michele Gershberg, Franklin Paul, Peter Henderson; Editing by Lisa Von Ahn/Jeffrey Benkoe)