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Following a Microsoft press release today - detailed in the story below - Yahoo has replied to reinforce Microsoft’s confirmation of not wanting to buy “all of Yahoo” - but that it may be interested in doing something with Yahoo.

“Yahoo! Remains Open To Value Maximizing Transactions” the press release was titled. What type of transactions given Google is already supplying PPC ads and WPP just signed to distribute other media.

The most interesting part of the press release was the note about how shareholders can assign proxy votes - given the threats to the current board investors have presented.

The press release read:

Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, today issued the following statement in response to the announcement by Microsoft Corporation that it is continuing to review potential transactions with Yahoo!:

“Yahoo! has confirmed with Microsoft that it is not interested in pursuing an acquisition of all of Yahoo! at this time. Yahoo! and its Board of Directors continue to consider a number of value maximizing strategic alternatives for Yahoo!, and we remain open to pursuing any transaction which is in the best interest of our stockholders. Yahoo!’s Board of Directors will evaluate each of our alternatives, including any Microsoft proposal, consistent with its fiduciary duties, with a focus on maximizing stockholder value.”

About Yahoo! Inc.

Yahoo! Inc. is a leading global Internet brand and one of the most trafficked Internet destinations worldwide. Yahoo! is focused on powering its communities of users, advertisers, publishers, and developers by creating indispensable experiences built on trust. Yahoo! is headquartered in Sunnyvale, California. For more information, visit pressroom.yahoo.com.

Important Additional Information

Yahoo! will be filing a proxy statement and accompanying WHITE proxy card with the SEC in connection with the solicitation of proxies for its 2008 annual meeting of stockholders. Stockholders are strongly advised to read Yahoo!’s 2008 proxy statement when it becomes available because it will contain important information. Stockholders will be able to obtain copies of Yahoo!’s 2008 proxy statement and other documents filed by Yahoo! with the SEC in connection with its 2008 annual meeting of stockholders at the SEC’s website at www.sec.gov or at the Investor Relations section of Yahoo!’s website at yhoo.client.shareholder.com. Yahoo!, its directors and its executive officers may be deemed participants in the solicitation of proxies from stockholders in connection with Yahoo!’s 2008 annual meeting of stockholders. Information concerning Yahoo!’s directors and officers is available in its Form 10-K/A for the fiscal year ended December 31, 2007, filed with the SEC on April 29, 2008.

Recently, Yahoo announced SearchMonkey, which will allow developers access to open source to create applications for search results. Well, today is the day that developers finally get their hands on the tools to make that happen.

There are two types of applications developers can build using SearchMonkey – Enhanced Results and Infobars.

• Enhanced Results take the current standard results and give them a makeover with a richer display. Links to results must remain intact (don’t mess with those search results!).
• Infobars will appear below search results and can display information such as metadata about the result, related links or content, or links for user actions (i.e. adding a movie to a Netflix queue).

The process for building SearchMonkey applications is very straightforward:

1. Application Type – Decide what type of app you want to build (Enhanced Result or Infobar) and enter basic info such as application name, description, and icon.

2. Trigger URLs – Decide the URL patterns that will trigger your app. For example, for the Enhanced Result above, the pattern would be “acmemovies.com/*”

3. Data Services – Data Services are the structured data on which SearchMonkey apps are based. They can be created using data available in the Yahoo! Search index (via data feeds or page mark-up such as microformats or RDF) or by using APIs or page extraction.

4. Appearance - Use PHP to configure how structured data should appear in the application.

Need incentive? How does a contest with $10,000 in prizes? Submit your application by June 14th to enter. The contest has four categories: Best Enhanced Result, Best Infobar, Most Innovative Use of Structured Data, Best Data Service, and Grand Prize (best over all categories).

And if you’re in the Bay Area, catch the SearchMonkey Launch Party tonight at Yahoo’s Headquarters in Sunnyvale.

Yahoo may need to fight off Carl Icahn Syndrome by Proxy today.

Munchausen syndrome by proxy (MSP) is a type of factitious disorder which appears strikingly similar to the Icahn strategy. MSP is a mental illness where a person acts as if an individual he’s caring for has a physical or mental illness when the person is not really sick.

Is Yahoo sick? No. That won’t stop dissident investors, though, from acting as if the company is.

Billionaire investor Carl Icahn, who’s invested more than a billion dollars in Yahoo, will initiate a proxy contest to oust Yahoo Inc.’s board of directors, according to the WSJ, a move designed to jumpstart the stalled MicroHoo merger.

Icahn (pictured here in a conservative blue suit) hasn’t won every proxy war he’s waged: Marvel Comics, for example, stands out as a success story after the superhero company defeated Icahn and his minions.

People with MSP assume the role of a sick person indirectly by lying about illness in another person under their care. We’re not calling Icahn a liar but we don’t think the Yahoo board is crazy for declining the Microsoft takeover bid.

In a proxy battle, Icahn would nominate 10 directors to replace Yahoo’s board before today’s deadline. The new slate of directors is said to include former Viacom Inc. CEO Frank Biondi, an Icahn proxy war ally.

Of course, the reason for the proxy battle differs from Munchausen Syndrome by Proxy, which is not done to achieve a concrete benefit, such as financial gain. For Icahn, it’s all about the Benjamins. In Sunnyvale, he’ll be known as the Yahooligan.

Like Baron von Munchausen, who rode a cannonball behind enemy lines then rode one back when he decided it wasn’t such a good idea, Icahn can enter enemy territory without suffering a scratch from Microsoft or Yahoo. His proxy board will wage the war for him.

Icahn has some big wins under his belt: he spurred Motorola’s decision to spin off its mobile phone business in March. He has also led a campaign by video-store chain Blockbuster to purchase electronics retailer Circuit City Stores.

If that deal doesn’t go through, Icahn has stated he’ll buy Circuit City.

No word on whether he’d buy Yahoo.

Now that Microsoft finally withdrew their bid for Yahoo, it’s a free-for-all for anyone claiming to be an analyst.

Mostly, there’s a lot of nervousness about what will become of the Sunnyvale search engine. At least one investor is calling for shareholders to withhold their votes for the current directors. Eric Jackson, who represents 140 shareholders who collectively own 2 million shares of Yahoo stock, said that the board didn’t negotiate in good faith. He expected Yahoo shares to be trading at $19-20 per share when the stock market opened this morning.

But Yahoo may have won over enough analysts. There’s the cautious experts who think that a partnership with Google for search advertising could save Yahoo. (Some estimates have Yahoo’s stock as being worth $35 as a result of such a deal.) Additionally, the optimists are hopeful over Yahoo’s open source initiatives such as Search Monkey. Then there’s the promise of a robust advertising platform, expected to arrive this fall.

Until then, Wall Street is punishing Yahoo for its rejection of Microsoft’s offer, though not quite as severely as Mr. Jackson expected. RBC Capital Markets Internet analyst Ross Sandler dropped the price target on Yahoo to $27 from $32. Expect to see agreement on this valuation. Overseas, the stock price dropped, an action echoed at the Opening Bell on Wall Street this A.M. At the time of this post, YHOO stock was down to $23, after closing on Friday at $28.67.

Investors knew this would happen and some are none too thrilled, as you might imagine. Some still hold out hope for Microsoft to return (or Yahoo to go begging at MSFT’s doorstep) or a separate deal to be developed with AOL or News Corp. Even though News Corp’s Murdoch officially said that he’s not interested in Yahoo, there has been speculation that talks have still occurred. Still, at least one report today says those talks have “cooled.”

So what happens next? Most likely, a Yahoo-Google deal will be announced, as early as this week. And then we’ll wait and see if that’s enough to keep investors happy or bring Microsoft back to meet Yahoo’s demands for a higher bid.

“OK so now what?” is the headline of Yahoo! co-founder Jerry Yang’s blog post this morning at Yodel Anecdotal, the official Yahoo! blog. Yahoo must face the future with Microsoft at its doorstep and Google as the dominant search engine.

Yang outlines the furious pace of Q1 when the search engine bought another company, launched new products, added partners, and opened new R&D labs:

* Acquired Maven Networks.
* Launched Yahoo! Buzz, OneSearch 2.0, mobile voice search, Flickr video, Shine.
* Previewed AMP and SearchMonkey.
* Addied Newspaper Consortium members.
* Opened new R&D labs in India and Israel.

All very impressive (along with a solid first quarter) but the blog post doesn’t address the number one question on everyone’s mind - and the most important one: What will Yahoo! do with search?

Yahoo has some innovative plans for improving search results but no plans for increasing market share.

OK, so now what for Google? Now that Microsoft is on the sidelines, does Google have any incentive to do an outsourcing deal with Yahoo?

The reality? No. Google share of searches continues to grow. Yahoo and Microsoft have been weakened further by the merger distractions.

Everything’s not OK in Sunnyvale today.

Without a Google deal in hand, Jerry Yang faces a very black Monday.

Microhoo bid raised aloft; Google-Yahoo Kool-Aid quaffed. “No Mas” cried Ballmer’s Microsoft.

Yahoo drank the Google paid search Kool-Aid to fight off Microsoft, leading the Redmond giant to retract its higher bid to acquire the Sunnyvale search engine. Microsoft reportedly offered $33 a share, and Yahoo held fast at $37 a share. That was too rich for Steve Ballmer’s blood. The prospect of Yahoo outsourcing its paid search to Google was also too much for Ballmer to stomach.

So Microsoft walked. In a letter to Jerry Yang (full text below), Steve Ballmer cited Yahoo’s intention to outsource search as the primary reason he decided to scotch the deal.

Of course that doesn’t mean enraged Yahoo! shareholders won’t sue Yahoo.

Ballmer wrote, “I hereby formally withdraw Microsoft’s proposal to acquire Yahoo!.”

Here’s why, according to Microsoft’s business logic:

Advertisers would use Google rather than Yahoo! Panama to manage paid search, fragmenting not only PPC but display advertising and the Yahoo! advertising ecosystem.
Yahoo then wouldn’t be able to retain talented engineers working on advertising systems - engineers whom Ballmer considers a key aspect of Yahoo’s attractiveness.

The decision would also create a morass of regulatory and legal problems that no acquirer - especially Microsoft - would want to slog through. Ballmer believes search market share of the combined Yahooo-Google deal would reduce competition and advertiser choice.

Ballmer took the argument one step further, stating the deal would “effectively enable Google to set the prices for key search terms on both their and (Yahoo!) search platforms and, in the process, raise prices charged to advertisers on Yahoo.

While it would be hard to prove a keyword-auction would enable Google or any search engine to “set prices,” the deal would increase keyword prices based on Google’s ability to monetize inventory more efficiently.

Yahoo responded by promising (again) to maximize shareholder value and pursue strategic opportunities. Yahoo still maintains Microsoft undervalued the company.

Yahoo! banged the drum (again) about:

“– a refined strategic focus to drive enhanced volume and yield;

– reorganized to focus its efforts on its most promising products and services;

– invested in innovations designed to revolutionize display advertising and facilitate closing the competitive gap in search; and

– enhanced expense and resource management to support improved profitability.”

As Jerry Seinfeld might have said, “Yadda, Yadda, Yadda, Yahoo.”

Be prepared Monday for Yahoo shares to plummet back to earth. (Full text of Steve Ballmer’s statement after the jump.)

Click to read the rest of this post…

When it comes to search, Microsoft is ever the egg while Google remains the chicken. Just a week after news of Google amping up its efforts in the world’s largest nation, Microsoft is revealing its plans to make headway into China.

But just how serious is Microsoft about this oh-so-important market? Only 100 employees are currently dedicated to Chinese search while Google will be adding 200 to its existing 600 person staff this year with expectations to continue adding to its numbers along those lines in coming years.

No doubt, acquiring Yahoo is part of Microsoft’s overall Asia strategy. Yahoo has a strong showing in Asia, something the Sunnyvale search engine wishes Microsoft would have taken into consideration when making its recent unsolicited bid.

Click Forensics has released data showing a decline in click fraud rates in the first quarter of 2008. The overall industry number came in at 16.3%, which is down 16.6% quarter-over-quarter but up 14.8% year-over-year.

Search engine content networks saw a higher average click fraud rate at 27.8%, which is down 28.3% from last quarter but, again, up from last year by 21.9%.

Botnet click fraud traffic was up 8% year-over-year.

Search engines are addressing the click fraud problem head on. Yahoo recently announced the provision of Click Filter Reports, which show advertisers the number of discarded clicks in their PPC campaign. The Sunnyvale search engine also announced a partnership with Click Forensics to address their click fraud woes. Lycos has announced a similar deal with Click Forensics.

Yahoo is creating some wide open spaces for web developers. This is no API playground, people. It’s a zoo.

SearchMonkey will let developers go hog wild with search results. Simple links are so old school. Listings could now include photos, reviews, ratings and contact information via developer mashups. Want portability? You got it.

And if you don’t want it, you should. Yesterday, I reported that search is integral in finding social media results that affect a consumer’s opinion about brands. SearchMonkey should be a tremendous tool to help influence your online reputation.

The launch party for SearchMonkey is May 15th. Here are the details:

When:May 15, 2008, 5:30 – 8:30 p.m.

Where:Yahoo! Headquarters – Url’s Café, 701 First Ave, Sunnyvale, CA 94089

RSVP: Register at upcoming.org AND send your full name and company name to searchmonkeyevent@yahoo-inc.com. Space is limited.

In the midst of firmly responding to Microsoft’s ultimatum, Yahoo has released details of the new AMP advertising platform, designed to streamline and automate online advertising across a variety of target markets, publishers and ad type. The platform will feature an open API and will also include Yahoo! owned-and-operated inventory and more than 600 U.S. newspapers in the Newspaper Consortium.

Some of the newspapers have already been given access to the platform. Jay Smith, President, Cox Newspapers said, “We are highly enthusiastic about the potential of this platform. We’re blown away by how Yahoo! is working with intensity and commitment to create a collaborative and very efficient platform that we expect will have a significant impact on our sales capabilities. This is a turning point for our industry.”

This is exactly what Yahoo was hoping to hear. Hilary Schneider, EVP, Global Partner Solutions, Yahoo! said, “AMP! from Yahoo will enable advertisers and publishers to connect with each other and their exact target audiences across the increasingly fragmented Internet, in a way that’s not possible with current solutions. We believe AMP! will deliver a faster, easier, and more automated and integrated way to create, buy, and sell advertising and do so across a transparent global marketplace.”

AMP is still a few months away from being released to the general public. The company expects to go live with the new platform in the third quarter of this year.

The releasing of details about AMP came in the wake of pressure from Microsoft for Yahoo to agree to their unsolicited bid for the company at $31 a share. Yahoo has until April 26th to agree to that price. With the recent positive forecast for the next 3 years of revenues and today’s announcement about AMP, Yahoo appears to be pulling out all the stops for either a better bid or more confidence from analysts about the future of the Sunnyvale search engine.