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Today was Yahoo’s big test, their SAT, their GRE, their LSAT.  All were waiting to see how they’d fare. Would earnings be stellar? Would they be average?  How were cash flows? What was the state of the display ad business?

With Google’s numbers already out, Yahoo’s Q1 earnings were on call to be the second benchmark to measure the Internet ad economy. With Microsoft’s takeover offer pending, the numbers were also set to provide a scorecard against which to measure the bid.  Too low? Too high?  Just right?

Turns out, in the test, Yahoo earned a nice comfortable B…a passing grade, good, not bad, better than average but not great either.  

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Mark Twain once quipped "The news of my death has been greatly exaggerated."  The same seems to be true for the state of the Internet advertising market.  Today, with a market on pins and needles in anticipation, Google reported Q1 earnings.  Contrary to fears, the news was good.  From the rooftops in Mountain View, Googlers could signal the all clear sign.  Not far away, at Yahoo, the news (and its expected impacted on Microsoft’s takeover efforts) was also greeted with excitement.  Good reports from Google rebuff anecdotal claims about a faltering Internet economy with fact.

During the analysts’ conference call, CEO Eric Schmidt told analysts, “It’s clear we are well positioned for 2008 and beyond, regardless of the business environment we are surrounded by.”

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Recently published data from the National Venture Capital Association showed fewer venture funds have been out raising capital (57 in Q1 2008 versus 83 in 2007 and 75 and 2006) but there’s no shortage of funding.  So far this year, about the same amount of money has been raised for new funds (compared to the same period last year) despite the smaller group of fund partnerships with their hands out.  The cumulative cash raised in 2007 was also high, insuring plenty of capital waiting to be deployed.  But if that’s not evidence enough, then recent investment rounds should be; three companies, Move Networks, Visible World and Realtime Worlds have all raised more than $25m in new rounds just announced.

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Nintendo’s Wii isn’t the target of many complaints.  It’s fun.  It’s accessible.  It’s playable.  What the Wii isn’t, and it doesn’t claim to be, is a high performance gaming beast.   It’s not about horsepower and bleeding edge graphics rendering.  The Wii’s creative interface and controllers put playability first and at that, it succeeds.  That doesn’t mean the Wii doesn’t aim to be more, just the opposite, it continues to chase large ambitions.

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Microsoft’s ultimatum expires on April 26th.  If no deal is struck by that date, they are threatening to take their offer to Yahoo’s shareholders and go hostile.    Is it a bluff or a promise? Only a few insiders know for sure.  But before that game of chicken can lead to an incident, two pivotal dates will first pass on the acquisition calendar: April 17th and April 22.  What happens on those two fateful April days may have a more significant impact on what happens next than just about anything else.

April 17th is the day of Google’s earnings announcement.  On the second date, Yahoo will announce results of their own.  Combined, information revealed from the pair of earnings releases will serve as a barometer for the Internet economy. Click to Read More

When Peer to Peer (P2P) Internet video broadcasters like Joost and Babelgum came on the scene they were the rage of the new thing.  Riding the wave of video sites like YouTube investors lined up to write monstrous checks.  Obscure deals were struck with talent agents.  High profile executives were hired; programming deals struck.  But in all the euphoria two weak spots were largely ignored: the requirement to download software when competing consumer behavior was predominantly browser based, and the question of how much market share could by attained when airing what are largely ubiquitous and non exclusive offerings.

A year later, those questions have come back like a nagging rash.  Adding to the itch, traditional media companies (TV and Film) have since gotten creative and ambitious in launching their own video services. (Examples: News Corp and NBC/U have Hulu, the BBC is at work Project Kangaroo in the U.K.)  In the face of those unanswered questions, and the competition, some are wondering if these high flyers are withering away. They’re asking tough questions about the whole internet video landscape.

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The thumb wrestling and public positioning continues.  As expected, Yahoo today issued a prompt and dismissive (but diplomatic) reply to Steve Ballmer’s weekend ultimatum.  Yahoo “is not opposed to a transaction with Microsoft if it is in the best interests of our stockholders,” Jerry Yang and Roy Bostock said.  The offer, however, remains too low. Further, they charge that Microsoft’s assertions and threats are misrepresentative and non productive. 

The full text of the 865 word letter is reprinted below. Some of the highlights along with interpretive commentary:

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