Please ensure Javascript is enabled for purposes of website accessibility

Bartz Would Have Said Yes to Microsoft

By Rick Munarriz – Updated Apr 6, 2017 at 1:01AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Yahoo! wants to buy you breakfast but it can't remember last night.

Microsoft (NASDAQ:MSFT) had the right idea when it proposed to Yahoo! (NASDAQ:YHOO) last year. It just went down on bended knee for the wrong CEO.

On CNBC's Squawk Box yesterday, Carol Bartz conceded that she would have probably taken Microsoft's offer, if she had been at the helm.

"Sure," she said. "You think I'm stupid?"

She went on to compare Microsoft's offer in the low $30s to today's trading at less than half of the software giant's original buyout proposal.

However, she also admitted that things were different after the collapse of Lehman Brothers.

Bartz stepped in as CEO this year, so she certainly can't be held accountable for last year's boardroom recalcitrance. However, she did spearhead this summer's search deal with Microsoft, which virtually kills off any reason for Mr. Softy to acquire Yahoo!

Bartz tried to justify the paid-search arrangement. Yahoo! will be collecting 80% of the revenue, with the flexibility to dramatically cut expenses now that Microsoft is doing all of the heavy lifting. This agreement will also let Yahoo! focus on display advertising. This is "the emotional side" of online advertising, according to Bartz. Unfortunately, it's also less lucrative.

There's a reason paid-search leaders Google (NASDAQ:GOOG) and Baidu (NASDAQ:BIDU) are growing faster than their smaller rivals. Contextually relevant, keyword-based text ads are the real moneymakers in interactive marketing.

Yahoo! may be able to populate its pages with engaging eye-candy spots, but there's a reason why Yahoo!, Time Warner's (NYSE:TWX) AOL, and action-based specialist ValueClick (NASDAQ:VCLK) are struggling these days.

There was a fork in the road, and Yahoo! went the wrong way.

Is it too late to come back? Yahoo! seems committed to the path it has chosen.

"The next big thing is that people need a little organization," Bartz said.

From her perspective, folks want to wake up to relevant news, their home team's sport scores, overnight tweets, and hyperlocal data. That's what the My Yahoo! initiative has been about for ages, but just 15% of Yahoo! visitors, according to Bartz, have gone through the trouble of updating their profiles to make them relevant.

To appease the lazier 85% of us, Yahoo! has been updating its home page to dynamically serve up this information.

Who knows? Maybe this winding path will meet up with Google's high-margin road in a couple of years. The major risk is that stickier sites -- such as Facebook and Twitter -- can lace up their sneakers and race down that same road even faster.

The road is long. And lonely. Let's hope that Microsoft didn't pawn the engagement ring.

Tapping Yahoo!'s snooze bar:

Google and Baidu are Motley Fool Rule Breakers recommendations. Microsoft is a Motley Fool Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz wonders whether it's time for Yahoo! to shed the exclamation point. Howns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$237.92 (-1.27%) $-3.06
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$98.74 (-1.40%) $-1.40
Time Warner Inc. Stock Quote
Time Warner Inc.
TWX
Baidu, Inc. Stock Quote
Baidu, Inc.
BIDU
$118.75 (-0.06%) $0.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
339%
 
S&P 500 Returns
109%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.