To: Jerry Yang
From: Jack Flack
Subject: After Microsoft Walks

Congratulations. You're about to "win."

Some people speculate that Microsoft's threat to pull its bid is simply a negotiator's bluff. More likely, it's actually trying to pre-establish the logic for their retreat, hoping the coverage will cast them as shrewd, not weak.

When they do pull back, the Yahoo story will shift dramatically. Thus far, most of the coverage assumed that Yahoo is a business that cannot regain its past glory, and that your company has no future on its own. While many predicted a pyrrhic victory for Microsoft, suddenly you're going to be the one who stands to lose by winning.

Much of the scrutiny will focus on you personally, given that many people suspect that your emotional resistance, not cold valuation analytics, drove you to reject the deal. To avoid going down in history as the peculiar, stubborn founder who preferred to manage his once-great company into the ground instead of selling it to the Evil Empire, you must act boldly against four pieces of advice.

1. Play the "Choice" card

Minutes after Microsoft announces the withdrawal of its offer, issue your own statement declaring the retreat a victory for freedom of choice and independent thinking. Proudly explain that the tech industry is becoming a duopoly of Google and Microsoft, and that Yahoo is one of the few competitors large enough to provide a genuine alternative.

Your lawyers were right to make you quite sensitive to the need to minimize your exposure to shareholder lawsuits by staking your rejection of the bid to a valuation argument. But now, you must make additional arguments that appeal to the interests of all your other constituencies.

Repeatedly explain to your employees that they not only have the opportunity to save Yahoo, but also the chance to prevent the industry itself from falling into a Dark Age of Dominance.

Within the tech world, harp on the importance of not selling out, ensuring the small players understand that the only way to keep a couple of 800-pound gorillas honest is to make sure there are also a few healthy 400-pound gorillas still hanging around the jungle.

Most important, consistently remind advertisers that they need you to succeed so that they can have legitimate alternatives on-line. They already worry about how much power Google has, and so it shouldn't be a tough sell.