Dear Carl. We here at Yahoo got your letter telling us how much we suck. We think you suck more And let us tell you why. That’s the short summary of Yahoo’s response to Carl Icahn’s letter yesterday telling Yahoo he will fight to oust their board and do a deal with Microsoft, assuming Microsoft is still willing. Plus, Yahoo does a deal with WPP on ad exchanges.

The Yahoo letter goes back to its view of negotiating with Microsoft, including highlighting things we’ve heard rumored to happen before, the last offer $33 from Microsoft given orally, Yahoo countering with $37, and Microsoft saying to have picked up its toys and walking out without a counter-offer.

That history, along with the rest of the letter, seeks to build a case that Yahoo’s board has indeed diligently worked to get a deal representing fair shareholder value and that, unlike what Icahn believes, Yahoo can still gain value on its own.

In other news, hedge fund Paulson & Co, which recently built a 3.4% stake in Yahoo, says it will support Icahn. I wonder if they built that large stake up before the deal was announced or after? And if they did it after, um, they’ll complain Yahoo didn’t do a deal that maybe would have made them more money versus if they’d been long-time investors rather than short-term gamblers. Just saying – maybe they did have a long-term stake, of course.

Want to know more about the folks Icahn’s putting up? Forbes has a nice rundown on them. I like that you’ve got a former CEO of Gray Global from 1970-2006 billed as having experience that could help Yahoo with online search advertising. Because those traditional agencies soooo got search advertising years ago, right? Mark Cuban is fun — guess we can expect him to bribe sites as he proposes to block Google from crawling them. Heck, Mark — Yahoo’s the only player with paid inclusion. Don’t stop at walling the web off from Google — offer to give everyone top rankings if they do it, too!

Speaking of partnerships, Yahoo’s just announced it has partnered with WPP. In the deal, WPP’s agencies will be able to put their clients out on Yahoo’s Right Media display ad exchange. And WPP will get Yahoo working with it to develop a "WPP Marketplace" that combines with WPP’s 24/7 Real Media so that WPP clients and potentially third parties can buy and sell ads.

And if that all sounds confusing, hey, it is to me, too. But then, the "partnership" with Publicis & Google announced last month was pretty hard to pin down as well. See Publicis & Google In Technology, Media-Planning Partnership for more on that.

For more discussion, see here on Techmeme.

Related Topics: Microsoft & Yahoo Search Deal | Yahoo: Business Issues

About The Author: Danny Sullivan is editor-in-chief of Search Engine Land. He’s a widely cited authority on search engines and search marketing issues who has covered the space since 1996. Danny also oversees Search Engine Land’s SMX: Search Marketing Expo conference series. He maintains a personal blog called Daggle (and maintains his disclosures page there). He can be found on Facebook, Google + and microblogs on Twitter as @dannysullivan. See more articles by Danny Sullivan

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