Yang breaks silence on Microsoft takeover

February 25, 2008: 12:41 PM ET

By Yi-Wyn Yen

PHOENIX -- Yahoo chief executive Jerry Yang knew exactly what was on everyone's minds at the Interactive Advertising Bureau conference on Monday.

In their first public appearance since Microsoft's hostile $44.6 billion bid for Yahoo, Yang and Yahoo (YHOO) president Susan Decker each gave a 15-minute speech about Yahoo's online ad strategy to a crowd of 400 industry players. Yang then kicked off a brief Q&A session with a joke.

"Before you start, let me guess what your first question is. Does it start with an M and end with a T?" Yang said with a smile. Unsurprisingly, Yang, dressed in drab charcoal gray, brown, and black, offered little insight into Yahoo's take on Microsoft's (MSFT) move to acquire the struggling Internet portal.

"We can't say a whole lot about the process that we're going through," Yang said. "We're very focused. We're taking the proposal that Microsoft has given to us seriously... It's been a galvanizing event for everyone at Yahoo. Our board is spending a lot of time thinking about all the alternatives. It's something that we need to think through carefully." Borrowing from the same, carefully-worded key points, Decker also referred to the Microsoft deal as a "galvanizing force internally and externally."

Yahoo rejected Microsoft's offer two weeks ago because the board felt Yahoo was undervalued at $31 a share. Since then, Microsoft has ramped up its plans to takeover the company and has hired a proxy firm to help oust Yahoo's board. And late Friday, Microsoft released an internal memo from Kevin Johnson, the president of Microsoft's platform and services division, about how the company plans to integrate Yahoo.

Yang remained confident about the situation. "The number of people who talk to us about the industry and what it could mean, in either direction or either outcome, it gives me a lot of encouragement that Yahoo goes to the right place," he said.

Yang reiterated his plan to turn Yahoo into a starting point on the web, a concept he promoted during a speech he gave at last month's Consumer Electronic Show. Decker said that Yahoo would soon release a new feature that highlights "the best content from the web" to drive more traffic to the homepage as well as to its alliance of 500 newspaper websites. Social news aggregators like Digg.com and StumbleUpon (EBAY) already provide similar services where users vote on popular content and news of the day.

Both Yang and Decker tried to drum up excitement for a new ad platform Yahoo is working on that will allow marketers to buy display, search, video, or mobile advertising in a convenient one-stop shop. "We're trying to revolutionize the online advertising industry," Decker said. She did not say when the new platform would be available.

The only prediction Yang offered was that spending for online advertising will be bigger than television in five years. Marketers spent $21 billion in online advertising in the United States in 2007, according to the IAB and PricewaterhouseCoopers. TV ad spending was $162 billion in the U.S., and is expected to rise 3% in 2008, according to marketing firm GroupM.

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