Saturday, 15 March 2008

Convergence: New Age of Cyber-Control



ResearchQuestion: How much of the power of the convergence culture will be shared between the new-media-based platforms and the new media audiences in the twenty-first century.

The purpose of this research essay is to analyse to what extent is the convergence sharing of the new media technology-based information and communication product? The example of the attempted hostile takeover bid of the pioneer Internet Company Yahoo Inc by Microsoft Corp to usurp Google Inc will be used as working model. In the twenty-first century there is the search engine Google Inc. which has 75 percent of the advertising market online in 2008. Therefore Google has various convergence-based-platforms based on social-networks such as YouTube which will be referred to as an example. Today there are many rival players such as, Yahoo Inc, Microsoft Corp, and Rupert Murdock’s News Corporation which are completing against Google Inc in an attempt to acquire a greater share of the advertising pie on the Internet. There are the new media audiences who also wish to play an active role in the convergence culture of the twenty-first century.

What is the Definition of Convergence?


To best explain the meaning of convergence would be to refer to the glossary of Convergence Culture: Where Old and New Media Collide: The example of the first sentence stating “A word that describes technological, industrial, cultural, and social changes in the ways media circulates within our culture” (Jenkins, 2007, p.282, italics original). This is just a succinct overview of this overly complex process of the new media exchange through multiple new-media-based platforms which provide the information and communication product for the new media audiences.

Google and YouTube

One example of convergence would be the acquisition of YouTube the new-media-based platform by Google in November 2006. YouTube which is an independent subsidiary of Google also shares the same vision of empowerment for the new media audiences so enabling anyone to access, upload and share original videos. Therefore the Internet is used as a tool for promoting YouTube’s video embedding code to ensure the exchange of the information and communication product between the new-media audience. The new-media medium can consist of social-networking websites such as MySpace, blogs, e-mails and mobile phones. This is also an ongoing example of YouTube allowing the new media audiences to be the broadcasters in control of the content in the twenty-first century for global consumption. The concept of the open stage for creativity includes the professional entertainment industry such as filmmakers, music record labels, movie studios and comedians is also applicable to the ‘amateur’ broadcaster. This online broadcasting channel is subject to the choices of the new media audiences because there is no set format for viewing these videos unlike the planned weekly programming such as television (YouTube – Broadcast Yourself, 2008, pp.1-2).

Overview of Yahoo

Yahoo Inc was the pioneer of the social-networking websites because of their information and communication products such as Yahoo search engine, e-mail and messenger on mobile phones as well as Flickr. Today in the heart of Silicon Valley there are partially abandoned prime location commercial lots which were part of a property acquisition worth $112 million. These purchases of a large parcel of land were meant to the site for the new offices of the thousands of employees of Yahoo Inc yet to be hired. The future in 2006 appeared to be bright on the Yahoo’s web portal horizon as the most favoured website on the Internet. The Yahoo new media audiences’ numbers may be the largest online although an error of judgement was why the company was unable to turn a profit with their search advertising business. A new technology-based-search-engine ‘Project Panama’ dating back to 2005 has to date proved to be ineffective as a rival to Google (CNNMoney.com. 2008, p.1).

The business issue of Yahoo’s management pouring more money into ‘Project Panama’ and choosing to overlook the graphical display advertising of their business did not impress Wall Street. The director and senior research analyst Friedland of Cowen and Company’s comments were overly harsh “Panama and their investment in search came way too late. Google had already won the war.” (CNNMoney.com. 2008, p.2, italics original). Yahoo had just 8.9 percent of the online advertising market share whereas Google managed to capture 71.2 percent in revenues in 2007. The Yahoo’s board of directors’ oversight at not recognising the potential of a search engine in 2000-20001 and therefore they concentrated on content instead. Microsoft Corp will reap the benefits from ‘Project Panama’ if the hostile takeover bid is successful. The hard-cold reality in 2008 is that this company has been forced to lay off 1,000 employees and Jackson one of the shareholders is of the opinion that “it’s beyond salvaging as an independent entity” (CNNMoney.com. 2008, p.3, italics original).

Microsoft’s Hostile Takeover Bid

Steve Ballmer of Microsoft Corp decided after 18 months of discussions about their hostile takeover bid of $44.6 billion in cash and stock with the Yahoo’s board of directors. The decision was made by Microsoft Corp in February that the time had come to offer to buy this pioneer Internet Company. The reasoning behind this deal was for both companies to combine forces against Google’s superior format as a search engine and the company’s’ formidable online advertising revenues. Microsoft Corp has a position of strength with their advertising and publishing side of their business but needs Yahoo to secure a place on the value chain attached to the new media audiences of the Internet. This transaction is based partly on the forecasted increase in online advertising revenues which generate over $40 billion at present with the expectation of $80 billion within a three year timeframe (Higginbotham, 2008, p.1).

Microsoft’s president of the platforms and services division Kevin Johnson is of the opinion that “Online advertising is not only a significant growth opportunity and but also a critical element of monetization of consumer Internet services” (Higginbotham, 2008, p.1, italics original). The market-share of Yahoo’s smaller display advertising may not help Microsoft achieve their combined goals of curtailing Google’s dominance. Microsoft Corp may find the price too high because of the ongoing fears of an online advertising recession (Higginbotham, 2008, p.1). However the prize will be the online search advertising revenues which are the main source of income for the search engine Google. In a global context Google leads the way in search usage with over 62.4 percent, and Yahoo in second place with 12.8 percent. Microsoft Corp is in fourth place which explains their urgency for combining both companies together (Perez, 2008, p.1). This chart shows the extent of how the new media audiences prefer Google’s search engine over other Internet websites.

Yahoo’s Rejection of Microsoft's Takeover Bid
Microsoft Corp will now launch into a proxy fight after the rejection of their hostile takeover bid of $44.6 billion in cash and stock after 19 days of attempting to acquire the pioneer Internet Company Yahoo. The initial value of the Yahoo’s shares has increased after Microsoft offering to pay $31 per share and as a result this pioneer Internet company was trading at $29.32 per share on the stock exchange on 19th February. The issue for Microsoft Corp is their bid has decreased in value to $41 billion because their shares have now dropped in value to $28.77. Yahoo has benefited from this hostile takeover bid attempt in the short-term because the initial value of each of their shares was just $19.18 on 1st February. Microsoft Corp has invested too much money in the Internet side of their business and considers the acquisition of Yahoo Inc as a solution to be able to complete against Google Inc (Perez, 2008, p.1).

Microsoft Corp have decided to play hard ball with Yahoo’s board of directors who are due for nomination by the shareholders before 13th March the final deadline for Yahoo Inc to enter into talks. This counteraction of this proxy fight will cost between $20 million to $30 million which is a less expensive way of forcing the issue with Yahoo which considers the original takeover bid of $44.6 billion undervalues their shares. The fact that Microsoft’s stock has decreased by 12.8 percent is why Miller of the Legg Mason Capital Management the second-largest shareholder is of the opinion that this hostile takeover bid will have to be increased (Sorkin, 2008, pp.1-2). The estimated offer of $40 per share is considered by Miller to be fair value so ensuring a deal will be agreed to by the Yahoo’s board of directors and shareholders. Yahoo may have no other option but to accept in this case scenario but this pioneer Internet Company had chosen to reject Microsoft’s hostile takeover bid on 11th February (msnbc:Reuters, 2008,pp. 1-2).

Microsoft Corp

Microsoft’s chairman Bill Gates is unlikely to agree to the notion of raising the $31 per share because of the additional cost of $1.4 billion needed for a successful takeover bid for Yahoo (Sorkin, 2008, pp.1-2). Microsoft Corp has the key software products of Windows and Office but the PC business is not as highly valued in the twenty-first century. The future is the IT industry rapidly expanding on the Internet for the benefit of the new media audiences which is why Google Inc and Microsoft Corp wish to to conquer this marketplace of cyberspace. Google wants to empower the new media audiences with the ability to discover and organise everything applicable to human knowledge. Microsoft just wants to provide the tools of technology at a premium price so that the new media audiences are able to process and elevate information (Weber, 2008, p.2). Microsoft Corps’ total worth of the company’s assets amounting to $270.7 billion with an annual profit of $22 billion with online products such as Internet Explorer, MSM Messenger, Hotmail, Aquantive (digital marketing firm), and Windows Live (BBC NEWS, 2008, p.2).

Rupert Murdock’s News Corporation

There appears to be a sense of interest from Rupert Murdock which if this media and technology deal is finalised the social-networking website MySpace and Yahoo would merge into an online partnership arrangement. This would enable the pioneer Internet Company Yahoo to remain independent of Microsoft’s hostile takeover bid (BBC NEWS, 2008, p.1). The upside for News Corporation is the 500 million-strong new media audiences of Yahoo which would also provide a wider audience base for the other media interests of Rupert Murdock. There would also be the online opportunities for advertising revenues (Chaffin, 2008, p.1). The trade-off would 20 percent of Yahoo’ shares brought by News Corporation and a private equity firm to push up the market value of Yahoo to $50 billion (Liedtke, 2008, p1). These shares would then be added to the media interests of News Corps which include Dow Jones, Wall Street Journal, Fox News, the Sun, the Times, MySpace and a 39 percent share in BSkyB. The market value News Corp at present is $60.2 billion and the annual profit is $4.45 billion of this new media conglomerate (BBC NEWS, 2008, p.2).

New Media Audiences

The process of going online to the Internet to browse, search and click onto advertisements can be somewhat risky in 2008 because of the websites that attempt to install malware on the computers of the new media audiences. Google the search engine has discovered over more than 3 million URLS on 180,000 websites capable of ‘drive-by-downloads' through the exploitation of the unforeseen vulnerabilities of the Internet browser. The online advertising side of Google is contributing partly to the malware distribution throughout the Internet-connected-system of computers globally. Today most advertisements online are in the third-party content with many websites syndicating their content to other parties. Therefore insecure content can be inserted somewhere on the website because of some server administrators failing to update their systems (Claburn, 2008, pp.1-2).

Today the new-media audiences are being categorised by their use of websites because of traffic pattern analysis on Google and Yahoo. The Google users appear to be much older with money to spend online and Yahoo users are too young with very little money to spare online. There is the question why would Microsoft want to acquire a pioneer Internet Company Yahoo that caters to the new media audiences with a low cash flow. The reasoning behind Microsoft’s logic may be this age bracket 18-35 years will be there for the long-term. But in the present the new media audiences of Google ranging from 33-54 years can spend their money now (Zeman, 2008, p.2).

Conclusion

The availability of the Internet and the freedom of expressing the conceptual reality of new ideas created such techno innovations such as Yahoo and Google. Yahoo was once a forward thinking pioneer Internet Company but somewhere down the cyberspace path the board of directors got bogged down in technological details concerning the search engine ‘Project Panama’. The Google search engine was able to turn the concept of online advertising into a profitable outcome. Convergence is at present the sharing of new-media applications on social-networking websites on the Internet such as the example of Google and YouTube. At the present the new media audiences do have a degree of freedom in expressing their creativity especially on YouTube as broadcasters of new media.

If Microsoft Corp is successful in their hostile takeover bid of Yahoo Inc there would be the new age of control over the PC world via the Internet through the guise of convergence. There could also be the PC software monopoly of what Internet access would be allowed to other rival competitor’s e-mail and websites for the new media audiences. This perceived threat to the Internet by Microsoft Corp may herald the demise of the freedom of movement to whatever websites the new media audiences choose to browse in the future. The new media audiences appear not to have much say in what will happen to Yahoo Inc if the proxy fight of Microsoft Corp is successful in installing a new board of directors. But then again this might be a totally unreal surreal world of the unexpected technological advances in the transfer of the communication and information product within the techno society of cyberspace.

Rupert Murdock’s News Corporation on the other hand may be the White Knight in this chess game of high stakes of the online advertising revenues and the uncertain outcomes for the future of the Internet. The perils associated with online browsing are also an ongoing problem of wondering what advertisement is safe to view. There is the ongoing issues of the unsafe third party content may install malware onto your hard-drive of your computer. This is of a financial concern for Google as this search engine could lose some of their online advertising revenues as a result. Today in the twenty-first century the new media audiences are now judged by which type of websites they choose to use be it Yahoo or Google.

Bibliography

BBC NEWS, 2008, News Corp 'in secret Yahoo talks' England, viewed 24th February 2008, http://news.bbc.co.uk/1/hi/business/7244178.stm

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Weber, T. 2008, Microsoft and Yahoo's shotgun marriage, BBC NEWS, England, viewed 17th February 2008, http://news.bbc.co.uk/2/hi/business/7222199.stm

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1 comment:

Anjana said...

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