Jay Bhatti was interviewed about Google Knol and he gives his opinion on how Google should think about its own content.  PDF Version

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Jay Bhatti was interviewed by Information week about Spock. The article can be found here.

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Forbes Magazine asked Jay Bhatti what he thought would happen in silicon valley after Microsoft decided to drop its bid of Yahoo.  The complete article can be found here.  PDF Version

Microsoft-Yahoo!: Ten Takeaways
Wendy Tanaka, 05.05.08, 6:00 AM ET

BURLINGAME, CALIF. -

Microsoft‘s three-month quest for Yahoo! came to a close Saturday as the software giant withdrew its multibillion-dollar bid for the Internet portal, confounding industry observers. They had placed bets on two other scenarios: a friendly merger between the tech titans at a higher price than the $31 per share Microsoft had originally offered, or a hostile takeover from Microsoft. Here’s what happened–and what’s next.

Why did the deal fall apart?

Microsoft (nasdaq: MSFT - news - people ) and Yahoo! (nasdaq: YHOO - news - people ) could not agree on an acquisition price. Microsoft Chief Executive Steve Ballmer and Senior Vice President Kevin Johnson met Yahoo! co-founders Jerry Yang and David Filo in Seattle on Saturday to negotiate. Ballmer raised Microsoft’s offer to $33 a share but Yang, Yahoo!’s chief executive, wanted $37. After the meeting, Ballmer sent a letter to Yang stating Microsoft’s withdrawal and adding that “a deal is not to be.”

Did Microsoft do the right thing by walking away?

Probably. Microsoft offered a hefty premium to Yahoo!’s price. The software titan’s original $31 a share offer on Jan. 31 was a 62% premium to the Internet portal’s stock price on that date. Microsoft said its last offer of $33 would have added another $5 billion in value to the deal. The deal was originally valued at $45 billion, but in the ensuing months, it fell to $42 billion as Microsoft’s stock price dipped.

Did Yahoo! do the right thing by not accepting Microsoft’s higher offer?

Probably not. Yahoo! doesn’t have an alternative deal that would return as much to shareholders.

How will Wall Street and shareholders react?

Yahoo!’s shares likely will take a beating. Analysts expect the stock to fall back to $19, the price it was trading at when Microsoft launched its bid. By contrast, Microsoft’s shares likely will rebound above $30.

Yahoo! has already been hit with shareholder lawsuits and should expect more. Microsoft’s shareholders aren’t expected to sue, but they’re anxious to know how the company plans to boost its stock.

What’s Microsoft’s next step?

It will pursue other acquisitions. In a meeting with employees last Friday, Ballmer indicated that he’ll turn his attention to other companies. “If the Yahoo! deal doesn’t happen, we know that there’s a different set of things that we’ll wind up investing in,” he said. “Yahoo! is not a strategy; it’s part of a strategy.” And Microsoft is no stranger to acquisitions: it has bought hundreds of companies in its 33 years.

What other companies is Microsoft interested in acquiring?

Speculation is swirling about Microsoft might be interested in acquiring AOL from Time Warner (nyse: TWX - news -people ) or MySpace from News Corp. (nyse: NWS - news - people ). Trip Chowdry, managing director at Global Equities Research, wouldn’t name names, but says Microsoft will seek out up-and-coming companies that have innovative technologies and also generate revenues from either licenses, transactions, subscriptions or advertising. “Microsoft will acquire a portfolio of companies beyond Web 2.0 plays,” Chowdry says. “Microsoft doesn’t want to fight yesterday’s story; it wants to capture the future.”

What’s Yahoo!’s next step?

The company is now under enormous pressure to find an alternative deal, or deals, that can rev up its stock. It’s considering a search-advertising outsourcing partnership with Google (nasdaq: GOOG - news - people ) to generate more revenue. The two companies launched a trial partnership a few weeks ago that is said to be going well. Look for an announcement on this pact.

Yahoo! also might still be considering a merger with AOL. Yahoo! also had discussions with News Corp. to acquire its social networking behemoth MySpace. But later, News Corp. switched sides and considered joining Microsoft’s bid for Yahoo!, so a deal with News Corp. seems unlikely now.

Will Microsoft come back at Yahoo! later?

If Yahoo!’s stock tumbles, industry observers say the acquisition door could open again, perhaps later this year. Microsoft will “watch what happens to Yahoo! and wait for Yahoo! to falter,” says Edward Deibert, a director at law firm Howard Rice Nemerovski Canady Falk & Rabkin. “If Yahoo! is unable to deliver, Microsoft could take another stab at a [lower] price.”

What will happen to Ballmer and Yang?

It’s unclear whether Ballmer will be seen as a strategic genius or the guy who couldn’t get the deal done. Chowdry says Ballmer only went after Yahoo! and put a sky-high price on the company to make sure no other company acquired it. And while Ballmer has done lots of deals, he’s never done a deal as big as Yahoo! It would have been at least seven times larger than Microsoft’s biggest deal to date–the $6 billion buyout of digital marketing firm aQuantive last year.

Yang could be ousted if he doesn’t find a way to bump up Yahoo!’s stock in a hurry. Industry watchers are scratching their heads about why he wanted so much more than what Microsoft offered.

What is Silicon Valley’s reaction to the news?

“I think people are pretty shocked and surprised” that a deal didn’t happen, says Keith Rabois, vice president of strategy and business development at Slide, a Web application developer. “The Internet trendsetters all think of Yahoo! as past its prime” and expected it to accept a good offer.

Jay Bhatti, co-founder of search engine Spock.com, says start-ups in the Valley are generally relieved that the deal didn’t happen because two major acquirers are still intact. The deal would have consumed both Microsoft and Yahoo! for a year while they integrated their operations and would have left the Valley with just one major acquirer where once there were two. Now, “Ballmer and Microsoft will want to do more small acquisitions,” Bhatti says. “They might spend $10 billion buying 20 small start-ups. I think the Valley’s pretty happy about that.”

Rabois notes that Microsoft’s image in the Valley has improved as well. “Microsoft had a bad reputation among Internet elitists mostly because of the browser wars” in 2000 when Microsoft put Netscape out of business, he says. Now, Microsoft is considered a good business partner. Slide, for instance, has an advertising partnership with Microsoft. The software titan’s most high-profile partnership is with Facebook, in which it owns a small equity stake.

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Jay Bhatti was interviewed by Robert Scoble.

The interview can be watched in its entirity over here.  Talking Personal Search With Jay Bhatti

http://dl.getdropbox.com/u/2135289/Podtech_SuperNova_spock_interview.mp4

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Yahoo Gets Vertical Search. Where’s Microsoft, Google? by Blaise Zerega | July 10, 2008 | PDF of Article

Today, Jay Bhatti was mentioned in Portfolio magazine.

Yahoo Gets Vertical Search. Where’s Microsoft, Google?
Blaise Zerega still hasn’t found what he’s looking for. Yahoo’s announcement to offer BOSS (Build Your Own Search Service– what happened to the Y?), is a better late than never attempt to do something different to compete with Google. Fair enough. But what’s particularly interesting is that the announcement is proof that many people – this editor included, think there’s a huge market opportunity for vertical search. It’s been overlooked as the Google juggernaut has tried to be all things to all people (quite successfully and quite profitably, I might add.)

Consider the people search engine Spock.com — if you haven’t tried it, do. Query your name in Spock and then do it with Google and Yahoo. Compare the results and you’ll see what co-founder Jay Bhatti has been up to since quitting Microsoft. Hey, Microsoft, why didn’t LiveSearch spot this niche?

Or for a slightly different take, think search + ecommerce. Consider Kayak.com, for travel. Or any number of wine search engines: wineaccess.com, wine-searcher.com, or winezap.com.

And while I’m at it, there’s a raft of other search engines out there, all chasing Google in some fashion. I like Clusty, Me.dium, and iSeek.

Among these startups, Kimbal Musk’s Me.dium is using Yahoo’s BOSS (see NYT article.) Whether BOSS gains traction, and whether Yahoo can marshal an army of Davids in its battle with the Goliath Google are questions that, given Yahoo’s uncertain future, we may never see answered.

What we will see, however, is an evolution of the search market to include these narrow plays. After all, on the web, it’s only by going niche that you build a broad audience.

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This week, eweek talked about how Microsoft could win in search with a vertical strategy. They specifically mentioned Spock as a site that could take search market share away from Google.  Below is a copy of the article.

How Microsoft Might Surround and Contain Google (from eweek)

Perhaps the best strategy that Microsoft might avail itself when it comes to competing with Google is not to get people to use the Microsoft search engine more, but rather getting more people to use the Google search engine less.

The strength of the Google Empire comes from the ad revenue that Google generates every time somebody uses their search engine. At this moment in time, the vast majority of the population thinks of using the Google search engine as a natural reflex. But over the course of the last year, we’ve seen the rise of any number of vertical search engine tools. They include people search services from Spock.com. Human-assisted search services from Mahalo.com. Any number of product and travel search services, including some from Microsoft. And the Powerset contextual search engine service that Microsoft acquired last week. And of course, Microsoft continues to flirt with the idea of acquiring Yahoo’s search services.

Microsoft could try to pull all these services together to create a universal search engine that would rival Google. But that would take a lot of time and might not even work. A more judicious approach would be to make it easier for users to access multiple search services as part of a strategy of weaning people off of Google. Early indications are that this is pretty much what Microsoft might be up to with Windows 7. The simple fact is that the Google search engine is not the best tool for all queries. In fact, as a blunt instrument the Google search engine can be as much counterproductive as it is helpful.

If Microsoft can create a user interface experience within Windows 7 that essentially makes it more natural for users to invoke multiple search services that are optimized for different tasks, then suddenly Google is not as dominating as it is today on the Web.

The first signs of this surround and contain approach to competing with Google might come in the form of a wave of alliances with vertical search companies. We have not seen evidence of those alliances yet, but given the strength of Google in the market you could assume that providers of alternative search services are anxious to partner with Microsoft.

In the meantime, Microsoft would do well to make sure that the search technologies it does acquire don’t simply fade away under Windows Live Search because right now, the name of the game is not necessarily how to build a better search engine but rather expose an increasing array of alternatives.

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The Yahoo! Deal
What Microsoft Could Do For Yahoo! Employees
Wendy Tanaka, 04.11.08, 6:30 PM ET – PDF Version – Link to Article

Despite the flurry of activity from background players in theYahoo!-Microsoft deal saga this week, many industry watchers still believe that the software giant may well prevail in its campaign to acquire Yahoo!. And typically, when one industry titan swallows another, job losses follow.

So should Yahoo! (nasdaq: YHOO - news- people ) employees be working on their résumés?

In this case, maybe not.

To achieve the promised “cost savings” that executives like to forecast when they’re acquiring a company, layoffs do often follow. In a late February speech at a Goldman Sachs (nyse: GS - news -people ) investment conference conference, Microsoft (nasdaq: MSFT -news - people ) Executive Craig Mundie conceded that job losses would likely follow a Microsoft-Yahoo! combo. “The reason we think there’s synergies, actually, even in the R&D side, is that there’s a lot of redundant development going on,” Mundie said.

“The search engines are both being developed right next to each other in two different companies, and many other components, the whole advertising system. Every one of these things is being redundantly developed by two groups of very, very smart people. At the end of the day, you don’t need both. There may be great components from the two of them, and over time you could smoosh them together, but there’s a lot of fungibility in that part of the investment.”

But not all those losses are likely to happen in Sunnyvale, say industry watchers.

Microsoft’s primary reason for buying Yahoo! is to combine forces and go head-to-head with Google (nasdaq: GOOG - news - people ) in the burgeoning online advertising market. That means Microsoft will have to handle the Sunnyvale, Calif., Internet portal’s workers with kid gloves if it wants to keep top talent and ensure a smooth integration of the two companies. “If Microsoft is going to treat Yahoo! people as second-class citizens, a lot of good people will leave,” says Kiumarse Zamanian, a former Yahoo! advertising executive.

In Yahoo!, Microsoft is gaining a tremendous asset: the world’s premier consumer Internet portal with 500 million visitors a month. “This is not a traditional acquisition. Microsoft needs to tread lightly,” says Burton Group analyst Ken Anderson. “They’re going after something more valuable than acquiring market share–Yahoo! is considered one of the most successful Internet start-ups.”

Indeed, Microsoft’s attempts to create blockbuster consumer and media properties through its MSN division have failed. “Microsoft is an engineering company. They don’t know how to sell ads,” IDC analyst Karsten Weide says. “What drives this business is media, understanding what advertisers and consumers want.”

While Yahoo! gives Microsoft a bounty of media and consumer assets, the software giant’s aggressive business style can capitalize on them, something Yahoo! couldn’t do. “It’s a Microsoft-run Yahoo!,” Anderson says. “Microsoft is very aggressive in how they run a corporation.”

So it’s Microsoft’s portal employees, not Yahoo! workers, that should be worrying about their jobs. “If I am an MSN online guy I’d be a little nervous,” Anderson says.

Jay Bhatti, co-founder of search engine start-up Spock and a former Microsoft product manager, still keeps in touch with workers in Redmond–and more than a few are concerned about their future. “A lot of people who work at MSN are saying, ‘What’s going to happen to us?’ ” Bhatti says.

Nevertheless, Microsoft’s bid for Yahoo!, announced Feb. 1, has created fear and loathing in the ranks of both companies. Since the announcement, Bhatti says the number of résumés Spock has received from Microsoft and Yahoo! workers has tripled. To shore up lackluster financials, Yahoo! laid off 1,000 of its 14,000 workers in February.

Even though Microsoft has said it will keep the Yahoo! brand after the acquisition, some aren’t convinced Chief Executive Steve Ballmer and his gang will stick to their promise. Zamanian, the former Yahoo! ad executive who is now vice president of Glam Media’s advertising platform, notes: “There’s a joke: What do you get if you merge Microsoft and Yahoo!? Microsoft.’ “

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