Yahoo to shareholders: We don't need Microsoft

Company is well positioned in growing online ad market, CEO Yang says

Yahoo Inc. 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 Corp.'s acquisition bid, he said in a letter to shareholders.

The letter, the contents of which Yahoo made public yesterday, stated that Microsoft's Feb. 1, $44.6 billion unsolicited takeover offer was too low. Yang said Yahoo is the most visited site in the U.S., 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% of the market.

The online ad market is expected to grow from $45 billion last year to $75 billion in 2010, Yang said, adding 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 increase visits to its properties "by 15 percent per year over the next several years," although he did not specify how. He also said 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% 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 yesterday in The Wall Street Journal.

Copyright © 2008 IDG Communications, Inc.

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