Wall Street Journals’s Arian Campo-Flores reports on housing crisis and how it has hit Florida especially hard. He reports Florida’s residents are looking to presidential candidates for specific remedies. Florida, California, and Nevada (=Las Vegas) have been the worst impacted housing markets in the USA. In other words, the bubble and greed was the maximum in these states. So the voters in these states are clearly going to use their vote to get their woes addressed. In my view, Florida’s voters should not expect any of the Republican candidates to solve their problems housing and employment problems.

Many of us have already been using Gmail’s voicemail feature to send them to email ids (very useful), and this voice and video chat will make it even better.

Checkout these Google blog posts for more details:

http://gmailblog.blogspot.com/2008/11/say-hello-to-gmail-voice-and-video-chat.html

http://googleblog.blogspot.com/2008/11/talk-face-to-face-right-from-within.html

You will like how Viacom asked for the house-keys of Google Youtube with it’s list of demands, which includes:

• Youtube User Data and Logging Histories
• Copies of all current and deleted videos (including private videos!)
• Source Code of Google Advertising Schema
• Source Code for Google Search Engine (and Viacom will do what with that

If you keep Internet economy and content privacy aside for a minute, Viacom sure is showing Goolge how to make a living with just a legal team.

So there’s a method to it, perfected over decades: Invest one-time in producing some decent content, and then make a living with lawsuits.

Now the judge has agreed to some demands, and said no to others.

To learn more, here’s a detailed blog post by Larry Dignan of Zdnet.

Microsoft is dealing from a position of strength, with an offer that most Yahoo shareholders see very good to let pass.
Meanwhile, Google is trying what it can to see how to counter this deal, and has also been talking to Yahoo to see if Yahoo can outsource the search to Google, which is expected to improve Yahoo’s net income by 25% according to some analysts.

1. Deal Makes Sense To Microsoft and Yahoo shareholders – exact price point can change a bit on negotiation. This is like a lifeline for Yahoo shareholders who have not been seeing much good news.

2. The real question: can two B+ guys together beat one A+ guy? It is here that I am not sure. Microsoft (a B+ in search only, not talking about their A+ in Windows OS)…is betting a lot that Yahoo’s search and traffic will help its online search business, but what if the key employees bail out selling their stock, and search customers don’t care anyway unless there is a strong difference in search results. Over the last 7 years, Yahoo has slowly but steadily become less relevant in search. Is this is the best use of $44 billion that Microsoft can make today? (Warren Buffet may have recommended only the stock-for-stock option in this case, rather than also giving the cash option).

3. Google won’t have to worry much about this deal. We think the market is overestimating the threat to Google, and that the 7.4% drop in its share price presents an sudden investment opportunity. If anything, Google might want to attract/ recruit some star engineers that fall-out from Yahoo, more proactively now than before. Google just has to watch out for the next generation of search, which must be in the making somewhere, we’ll know about it in a couple of years.

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Here is the stock price movement of Microsoft, Yahoo, and Google after the announcement.

And here is Microsoft’s letter to Yahoo Board yesterday.

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January 31, 2008

Board of Directors
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089
Attention: Roy Bostock, Chairman
Attention: Jerry Yang, Chief Executive Officer

Dear Members of the Board:

I am writing on behalf of the Board of Directors of Microsoft to make a proposal for a business combination of Microsoft and Yahoo!. Under our proposal, Microsoft would acquire all of the outstanding shares of Yahoo! common stock for per share consideration of $31 based on Microsoft’s closing share price on January 31, 2008, payable in the form of $31 in cash or 0.9509 of a share of Microsoft common stock. Microsoft would provide each Yahoo! shareholder with the ability to choose whether to receive the consideration in cash or Microsoft common stock, subject to pro-ration so that in the aggregate one-half of the Yahoo! common shares will be exchanged for shares of Microsoft common stock and one-half of the Yahoo! common shares will be converted into the right to receive cash. Our proposal is not subject to any financing condition.

Our proposal represents a 62% premium above the closing price of Yahoo! common stock of $19.18 on January 31, 2008. The implied premium for the operating assets of the company clearly is considerably greater when adjusted for the minority, non-controlled assets and cash. By whatever financial measure you use – EBITDA, free cash flow, operating cash flow, net income, or analyst target prices – this proposal represents a compelling value realization event for your shareholders.

We believe that Microsoft common stock represents a very attractive investment opportunity for Yahoo!’s shareholders. Microsoft has generated revenue growth of 15%, earnings growth of 26%, and a return on equity of 35% on average for the last three years. Microsoft’s share price has generated shareholder returns of 8% during the last one year period and 28% during the last three year period, significantly outperforming the S&P 500. It is our view that Microsoft has significant potential upside given the continued solid growth in our core businesses, the recent launch of Windows Vista, and other strategic initiatives.

Microsoft’s consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers. In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together. These discussions were based on a vision that the online businesses of Microsoft and Yahoo! should be aligned in some way to create a more effective competitor in the online marketplace. We discussed a number of alternatives ranging from commercial partnerships to a merger proposal, which you rejected. While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing.

In February 2007, I received a letter from your Chairman indicating the view of the Yahoo! Board that “now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction.” According to that letter, the principal reason for this view was the Yahoo! Board’s confidence in the “potential upside” if management successfully executed on a reformulated strategy based on certain operational initiatives, such as Project Panama, and a significant organizational realignment. A year has gone by, and the competitive situation has not improved.

While online advertising growth continues, there are significant benefits of scale in advertising platform economics, in capital costs for search index build-out, and in research and development, making this a time of industry consolidation and convergence. Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers. Synergies of this combination fall into four areas:

* Scale economics: This combination enables synergies related to scale economics of the advertising platform where today there is only one competitor at scale. This includes synergies across both search and non-search related advertising that will strengthen the value proposition to both advertisers and publishers. Additionally, the combination allows us to consolidate capital spending.
* Expanded R&D capacity: The combined talent of our engineering resources can be focused on R&D priorities such as a single search index and single advertising platform. Together we can unleash new levels of innovation, delivering enhanced user experiences, breakthroughs in search, and new advertising platform capabilities. Many of these breakthroughs are a function of an engineering scale that today neither of our companies has on its own.
* Operational efficiencies: Eliminating redundant infrastructure and duplicative operating costs will improve the financial performance of the combined entity.
* Emerging user experiences: Our combined ability to focus engineering resources that drive innovation in emerging scenarios such as video, mobile services, online commerce, social media, and social platforms is greatly enhanced.

We would value the opportunity to further discuss with you how to optimize the integration of our respective businesses to create a leading global technology company with exceptional display and search advertising capabilities. You should also be aware that we intend to offer significant retention packages to your engineers, key leaders and employees across all disciplines.

We have dedicated considerable time and resources to an analysis of a potential transaction and are confident that the combination will receive all necessary regulatory approvals. We look forward to discussing this with you, and both our internal legal team and outside counsel are available to meet with your counsel at their earliest convenience.

Our proposal is subject to the negotiation of a definitive merger agreement and our having the opportunity to conduct certain limited and confirmatory due diligence. In addition, because a portion of the aggregate merger consideration would consist of Microsoft common stock, we would provide Yahoo! the opportunity to conduct appropriate limited due diligence with respect to Microsoft. We are prepared to deliver a draft merger agreement to you and begin discussions immediately.

In light of the significance of this proposal to your shareholders and ours, as well as the potential for selective disclosures, our intention is to publicly release the text of this letter tomorrow morning.

Due to the importance of these discussions and the value represented by our proposal, we expect the Yahoo! Board to engage in a full review of our proposal. My leadership team and I would be happy to make ourselves available to meet with you and your Board at your earliest convenience. Depending on the nature of your response, 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.

We believe this proposal represents a unique opportunity to create significant value for Yahoo!’s shareholders and employees, and the combined company will be better positioned to provide an enhanced value proposition to users and advertisers. We hope that you and your Board share our enthusiasm, and we look forward to a prompt and favorable reply.

Sincerely yours,

/s/ Steven A. Ballmer
Steven A. Ballmer
Chief Executive Officer
Microsoft

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Q1. How can I increase my sales through online channels?

Answer: This really is a big question with no one answer – otherwise everyone would have done it! What we have found from our experience of running multiple businesses is that there is a need for a structured approach to attract targeted visitors (prospects) and ensure that the entire chain of events is planned – till the time an order is placed.

Many services companies will say “oh, this may work for product companies, but not for us”. This is just a lame excuse by someone who fears change. We have seen successful examples of services companies generating almost 80% revenues from their website + other online channels. The need is to create an online platform (say, a part of your website/blog) which shares valuable information with prospects, and a system which can do all of what a physical sales person can do. With Audio and Video possible on web-pages, a good website can generate more sales than a team of salespeople, at a fraction of the cost. The only expenses you have to make are for online marketing, for which you can see other posts on this site.

Q2. We have built a great website…now how do we promote it?

Answer: Do you know which places your clients and prospects visit often? That’s the place you need to advertise in some way. Consider buying text links, we have found them best on performance/price. Some sites also offer paid articles referring your site – those are good too. For example, our clients often visit sites like: www.cio.com, www.cfo.com, www.ft.com, and many smaller sites – all of them are good options to advertise. Small sites and blogs can give a great return on online ad spend. So invest some effort in that. Over the last 6 months, we have developed a way to identify such small sites relevant to each business, and you can contact us for more info.

Q3. What are the options to increase my online sales?

Answer: There are numerous options, and each product/service should plan a suitable mix of them: Pay Per Click (PPC) Advertising, Text Link or Banner Advertising on High Traffic Sites, Sponsored Articles on Sites or Blogs, Email Marketing, Mobile SMS Marketing (this is a very exciting area, and will evolve rapidly in 2-3 years – if you are a consumer products/services company – you just can’t afford to ignore this).

Q4. How much should I spend on online marketing?

Answer: Just like in a physical, brick & mortar business – your online marketing budget would have two components: (1) Brand Building (2) Product/Service Marketing. Now, if you already have a known brand, then skip (1), and spend effort and money only on (2), which is more focused towards earning dollars by selling your Product and Services. Plan to spend up to 10% of the sales volume, and spend in phases to ensure results are coming. So if you have a product/service of $500 value, and you want to sell to 200 customers, then your desired sales volume = $100,000. So you should plan to spend up to $10,000 in online marketing. This does not include your fixed costs, like staff salary and business operating expenses.

Now, it’s important to note that the amount you spend will depend on the gross margin you have on the product/service. So you can choose to spend just 4-5% as well. But 10% is on the upper side, and will perform very competitively to physical sales people. If you are spending more, you are probably not executing well and there is room for improvement.

Q5. What kind of team and skills do I need to increase my sales online?

Answer: The team can be very lean, but must understand your business and products/services well, and also understand how information is shared in the Internet space. Many Small and Medium businesses are able to do it (with some initial guidance) with just 1-2 full-time staff because they can easily coordinate with the sales and production teams. But its a different problem in large companies: the marketing departments often don’t have the skills and support to generate online sales, and the sales teams don’t have access to any part of the website – so it’s a difficult situation.

Our recommendation is to give the responsibility of online sales also to the Sales/Product Teams, and give them the tools and training to make it happen. Regardless of your company size, new media tools can be (and should be!) used successfully. If you are not sure about your team’s understanding/skill of operate your blog (write and discuss with audience), you can contact us for inputs as we have done it for a few companies in 2007. At its core, your website is an extension of your key business people and presentations – and is best suited to generate business leads.

We hope you found these answers useful. You are welcome to ask your questions on how to increase online sales.

Wishing you a great 2008!
Shankar AVSB
CEO, MyOrbit

Views are equally distributed on whether it could happen again. Thank to technology, the world’s capital markets are 100 times more automated today than back in 1987. And that is what makes some senior folks think that a rapid fall is more easily possible today than in the past. Alan Greenspan says:”bubbles are only visible in hindsight”. Watch the video to learn more.