blinkx Make a Run at Miva

8 August, 2008


blinkx have announced they have made a $41 million cash offer for Miva, which represents a 54% premium above the $0.78 closing price of Miva stock yesterday.  As Miva has $20 mill cash in the bank, as this price blinkx would actually only be paying $21 million.

Miva was a combination of eSpotting and FindWhat and at one time would have been considered by a few as being on the edge of getting into the Premiership of PPC ad networks.


Miva have turned down the unsolicited offer but with Miva announcing their Q2 results today, AdViking states the obvious and say’s it’s only a matter of time before this deal is done.

Miva announced their Q2 results on Monday.  Revenue was $30.2m for the quarter, down from $32.7m year on year.  Which was a EBITDA loss of $5.2 million.  And cashflow dropped down to $17.2 million.

Why Should I Care About this Deal?

On the surface (e.g.:  Miva announcing staff cuts), this could just appear some consolidation but few points make it interesting.

blinkx are a British company, spun out of Autonomy, and to date are considered a video play (video search engine and contextual video advertising platform).  Cross-Atlantic traffic going from the Old World to New is a bit different and thankfully (and this is good based on what AdViking has heard from Miva insiders about the state of the Miva technology), PiperJaffray analyst Rajeev Bah also thinks this is about getting in some additional revenue and advertisers from a pure-Search network.

Blinkx’s proposed bid for Miva has the potential to significantly change the shape of the business, marrying Blinkx’s advanced search and ad-matching capabilities to Miva’s material base of search-based advertising revenue

For a lot of people (like AdViking contributor and ex-eSpotter, A Fuller View on the Miva Blinkx Deal and Motley Fool’s Rick Aristotle Munarriz) who have been following the fall from great height of Miva since 2005, having this deal done will bring some needed closure.

Offer Letter

Here’s the offer letter:

August 8, 2008

MIVA, Inc.
5220 Summerlin Commons Boulevard
Suite 500
Fort Myers, FL 33907
Attention:     Peter Corrao, CEO
Larry Weber, Chairman
Members of the Board of Directors

Dear Ladies and Gentlemen,
Re: blinkx and MIVA Combination

I am writing on behalf of the board of directors of blinkx Plc to make a proposal for the business combination of blinkx and MIVA. Under our proposal, blinkx would acquire all of the outstanding shares of MIVA common stock for $1.20 in cash per share. Our proposal is not subject to any financing condition. The transaction would be funded from existing cash resources of the two companies.
Proposal. Our proposal represents a 54.0% premium above the closing price of MIVA common stock of $0.78 on August 7, 2008, and a 36% premium over the average closing price for the one month prior to August 7, 2008.
By whatever financial measure one might use, we believe this proposal represents a compelling value realization opportunity for your shareholders and the quickest and most secure way to see such value, particularly given the several challenges MIVA faces in the near term, including: risk and cost associated with the new technology platform, a deteriorating cash position, continued deterioration of the Media EU business and continued decline in revenue and profitability.
We believe that MIVA’s shareholders would not be well-served by any delay in negotiating or completing the merger process, and that time and/or another round of restructuring plans will not significantly increase MIVA’s valuation.
Background. Having worked together for a number of years you will be aware that blinkx is the world’s largest and most advanced video search engine. Founded in 2004 by Suranga Chandratillake, the company completed a successful IPO on the London Stock Exchange (AIM) in May 2007 and currently has a market capitalization of approximately $160 million, with headquarters in San Francisco, CA and the UK. With an index of over 26 million hours of searchable video and more than 350 media partnerships, including national broadcasters, commercial media giants, and private video libraries, blinkx has cemented its position as the premier destination for online TV. blinkx pioneered video search on the Internet, enhanced by $150 million in R&D over 12 years, and is now protected by 111 patents.
Rationale. blinkx believes that a combination of the two companies would be mutually beneficial to both companies’ shareholders, employees, and customers. blinkx and MIVA have complementary businesses that could benefit greatly from blinkx’s technology and MIVA’s distribution network.
blinkx has worked with MIVA as a customer and partner for a number of years and has a great deal of respect for MIVA’s success in building a global keyword advertising network and growing the MIVA Direct consumer offering. We believe, however, that with the Internet’s continued progression towards rich media and newer forms of advertising, more advanced technology will play a fundamental role in achieving success.
blinkx already has in place a proven and growing video-driven revenue engine, and enjoys an unrivalled technology portfolio which is applicable across many aspects of the online market. A combination of the two companies – fusing MIVA’s advertising network with blinkx’s ability to leverage its technology portfolio into the online market – presents an exciting and compelling opportunity.
Specifically, blinkx’s advanced and scalable matching technology will enable immediate platform improvements for MIVA. As a result large portions of relevant search traffic from MIVA’s search ad network will be monetizeable at higher rates through blinkx’s technology. Furthermore blinkx’s technology holds the potential to build on MIVA’s existing toolbar network, adding the latest functionality and an entirely new revenue stream. Finally, MIVA’s consumer sites and portals, that already attract large audiences, will immediately benefit from blinkx’s advanced video technology and AdHoc advertising platform.
Process and Employees. We would value the opportunity to further discuss with you how to optimize the integration of our respective businesses to create a leading global technology company. We believe that the management and employees of MIVA are critical to realizing a successful transition and foresee an important and central role for MIVA employees in the combined company.
Any acquisition of MIVA would be subject to the opportunity to conduct a limited confirmatory due diligence investigation, the negotiation of a definitive merger agreement containing customary terms and conditions, including customary conditions to closing; no material adverse change to MIVA’s business; appropriate shareholder approvals; and any regulatory requirements. Given our participation in the industry and MIVA’s public status, we envisage an efficient due diligence process appropriate to a public company. We are prepared to deliver a draft merger agreement to you and begin discussions immediately.
Due to the importance of these discussions and the value represented by our proposal, we expect the MIVA Board to engage in a full review of our proposal and discussion of its contents with MIVA’s shareholders. We are prepared to meet at a time and location of your convenience to complete due diligence and commence definite agreement negotiations.
We believe this proposal represents a unique opportunity for MIVA’s shareholders to realize value, and the combined company will be well positioned for future growth. We hope that you and your Board share our enthusiasm, and we look forward to a prompt and favourable reply.
Yours sincerely,
Suranga Chandratillake
CEO and Founder

This communication does not constitute, or form any part of, any offer for, or any solicitation of any offer for, securities or the solicitation of any vote for approval in any jurisdiction

Y! Annual Meeting: Venting but No Real Big Changes

1 August, 2008

Following on from AdViking’s attempt to liveblog the meeting earlier, some quick round up points.

About Microsoft:

The board went over the top in trying to defend themselves and I believe that this comment from one small investor really is all that has to be said:

“You’ve got a situation where it sounds like the girlfriend in a breakup now trying to convince the world she was the initiator, not the victim,” he said. Microsoft looks like the “strong, silent type,” and Yahoo looks “weak.”


The Board

There was some fireworks from the audience but the vote went ahead smoothly and other than the Ichann change and the ex-AOL honcho Jon Miller on/off switch, everyone still has their seats.

Y! Update

In a microblog nutshell:

We had a great strategy.  MS bid made us focus on something else  Still, we have traffic, the Internet is great it’s just our tech isn’t so hot & we have loads of talent (ignoring the fact of the recent exodus).

Here’s link to the deck they gave.  Not that interesting in itself but some good points to pull out for industry trends.

All in all, AdViking now regrets earlier excitement and agree with his wife about being a geek…

Handbags @ Dawn: Yahoo! Annual Meeting

1 August, 2008

In what’s probably a sad indication of the excitement factor in AdViking’s life at the moment but I’ve woken up this morning with a thrill that today’s finally the day of the 2008 Yahoo! Annual Meeting.

We can expect fireworks, what with threats from the big shareholders, questions about turning down Microsoft and what’s that the Google/Yahoo! ad deal now has politicians demanding the deal gets a good look at.

All ready, we’ve got the somewhat deflating news that Carl Ichann will not be attending, maybe he’s be sending Ballmer instead!

The meeting will start at 10am Pacific and webcast here.

Microhoo Fallout? Kevin Johnson Leaves Microsoft

24 July, 2008


In a surprise move, it was announced yesterday that Kevin Johnson has left Microsoft to become CEO of Juniper Networks.

Johnson was the driving force behind the run at Yahoo! and was head of the Platform & Services Division, the largest group at Microsoft, containing Windows, Live, Advertising (APS) and a few other things.

Debate around the why, what, etc. of this is pretty split, e.g.:

TechCrunch are positive, Microsoft Rumbles, Rearms For Online War It Can’t Win Without Yahoo

Though Kara Swisher (no surprise here) comes down on the negative side:  Microsoft’s Latest Web Stumble: Kevin Johnson Out

Why Did He Leave

AdViking believes that the run on Yahoo! is a (defensive) tactical play to ramp up the Search side of things and protect Windows and Office revenues (i.e.:  the part of the Cloud War rather than the Search Battle).

This run currently looks like it was a failure and some of the moves that were taken looked ill-conceived and the impact was that Ballmer and Microsoft currently look like they have egg on their faces.  The price to pay for this is that Kevin Johnson is leaving.

Has the Axe Fallen

The Impact

The immediate impact is that they have now split Johnson’s empire into two groups:

  • Windows/Live – Reports directly to Ballmer
  • Online Services Business – The search is on to fill this gap.  This fact is surprising and a clue to the fact this was an unplanned exit.

Picking up on the point that there is no-one in place to head up the Online Services Business, an interesting echo from the sphere is that this could possibly leave room for an acquisition CEO to fit into a key role nicely (e.g.:  Jerry Yang)

AdViking thinks this split makes a lot of sense and from looking at the Org chart before yesterday, didn’t quite understand why two such important groups rolled up under one Exec.

AdViking further likes the split as it does mean that the advertising side of the business will now have more power and therefore will be able to offer the industry an even more competitive offering.

Background Materials

Official Microsoft Press Release

News of the departure and re-org was announced in a few ways including a 2009 Strategic Update email from Ballmer.  This has had wide coverage in full text.

Some interesting tidbits to pull-out from these:

Betting on Display Advertising

Senior Vice President Brian McAndrews will continue to lead the Advertiser & Publisher Solutions Group (APS)…McAndrews will continue to focus on the display advertising opportunity for Microsoft

Google and Search

We continue to compete with Google on two fronts—in the enterprise, where we lead; and in search, where we trail. In search, our technology has come a long way in a very short time and it’s an area where we’ll continue to invest to be a market leader. Why? Because search is the key to unlocking the enormous market opportunities in advertising, and it is an area that is ripe for innovation. In the coming years, we’ll make progress against Google in search first by upping the ante in R&D through organic innovation and strategic acquisitions. Second, we will out-innovate Google in key areas—we’re already seeing this in our maps and news search. Third, we are going to reinvent the search category through user experience and business model innovation. We’ll introduce new approaches that move beyond a white page with 10 blue links to provide customers with a customized view of their world. This is a long-term battle for our company—and it’s one we’ll continue to fight with persistence and tenacity.

On the Yahoo Run

…I want to emphasize the point I’ve been making all along–Yahoo was a tactic, not a strategy. We want to accelerate our share of search queries and create a bigger pool of advertisers, and Yahoo would have helped us get there faster.

Facebook, MySpace, et al = Double Bubble?

26 June, 2008

AdViking has good days and bad days when pondering Social Media and sometime this means quitting Facebook and sometimes heavy use of Twitter.  Generally, the main point is that we are in the early iteration of the what and how of Social Media and we’ve got a long way to go before it’s all pervasive and delivering true value to the user.

Recently came across Charlene Li‘s deck on the Future of Social Networks on SlideShare and thought it was worth sharing as some solid consolidation of thoughts flying around the ether.  i.e.:

  • The youth are all ready heavily into this stuff (e.g.:  Club Penguin)
  • Your Universal ID has to be easier to use
  • AOL, Google, Microsoft will be coming hard into this space

Obscene Valuations?

Anyway, onto the main point and that is there’s a lot of debate if the valuations the Social Networks are getting ($15bill Facebook, $1bill LinkedIn, $850mill Bebo, $580 mill MySpace) are just crazy and more proof points that we are on the cusp of bubble2.0 or are just fair indications of value.

There have been some recent work in just this area that is useful to ponder.

First, Andrew Chen had a stab at looking at MySpace versus Facebook: Analysis of both traffic and ad revenue, using Google Trends.

Second, Michael Arrington did some Modeling The Real Market Value Of Social Networks.

The later piece is the real interesting one to digest, mainly as they start from looking at a wider set of networks, use comScore data for the traffic and also the recent PWC ad spend numbers.  And though Arrington is the first to admit there’s some flaws in the model (e.g.:  LinkedIn comes out low but the actual traffic could be considered high value), you can still take it as a starting point based on some data rather than just plain rhetoric.

Yahoo! must really hate Microsoft

14 June, 2008

Well, as we all know Yahoo! and Google announced a new deal around paid search yesterday. Lots and lots of coverage and analysis on TechCrunch, here and here, and SAI here. What strikes us at AdViking late on a warm weekend afternoon is that if you dig into the deal [read this one!] it really looks like the CEO and other senior executives at Yahoo must really hate Microsoft. You might even think they look pretty desperate and we are not talking about desperate house wives (that at least would be fun to watch).

Don’t get me wrong, we are fans of Yahoo and I’ve been using the site for more than a decade. But if this deal isn’t letting the fox right into the hen house then there is obviously things we’re not bale to see from up here in the land of the viking. I guess we can look at this as the end of web 1.0 and the day Yahoo as they become essentially an affiliate to Google (much like AOL). We also think there must be a host of legal and regulatory problems that lie ahead for G and Y.

Now the really interesting thing is what will other big publishers and content owners do? And is this day that a new online advertising war started?

We need to go back to the fort for awhile to ponder this but in the meantime we are going to re-read the Blog Maverick’s post on one way possible to beat Google and also think some more about how great brands (both advertiser and publisher) like to work together (we’ll start be re-reading some post such as this one from JB – The Rise of Independent Media Brands Online). Enjoy the rest of your weekend!

Adify Bought for $300 million

30 April, 2008

AdiFY logo

Cox Enterprises, a family run media company with reported $15 billion of revenue, has announced that they are going to purchase Adify, a niche ad network enabler, for $300 million.

Russ Fradin, Adify CEO, has posted some insights into the deal, the main take-away is that Russ and the rest of the management team are sticking around – very different from what happened with Quigo then!

On rumoured revenues of $7 million in 07 and on track for $35 millon in 08, the ticket price is an extreme multiple and one that a lot of attention will focus on. AdViking things actually the deal is very progressive by Cox (probably the benefits of being family run!).

The main reason that AdViking thinks this is that with the consolidation and domination by GYM, having preferred access to an advertising technology will ensure that as the continued growth of digital advertising occurs, Cox are in a great position to protect and extend their revenues.

AdViking is also very interested in the deal as it is further validation of the need for indy players in the value chain, also see the recent investment in Federated Media.

From looking at the recent comScore data on US ad networks, AdViking would put some money on Burst, ContextWeb and some of the others to go. It also does start to put a very interesting spin on what the opportunity for OpenX could be.