Friday, May 04, 2007

Microhoo - Microsoft buying Yahoo

Well after many years of speculation, it is now all over the web. Among other places, according to the Financial Times article Microsoft eyes takeover of Yahoo, Microsoft is looking to acquire Yahoo. An outright merger doesn't seem like a great idea for either entity. The two companies have very different cultures and technology preferences. Not to mention, massive redundancy in many if not most areas. I have a hard time believing the internal Microsoft bureaucracies and vested interests won't end up "Hotmail-izing" the platforms at massive and unnecessary cost. As a result of this, and the significant cultural differences, I have a hard time imagining many of the great Yahoo folks would stick around. To me this smells like the AOL take over of Netscape. AOL simply wanted the traffic and name, and the great Netscape technologists fled by the droves. Yahoo has suffered few defections to Google due in part to its great work environment and people, I wonder how long that could hold up in a merger.

It seems to me, a smarter thing to do would be to leave the two companies separate, and create an alliance on the advertising side which is where they are both really suffering. Perhaps it makes sense to merge the Panama and MSN equivalent folks into a new organization where they would focus on providing a service comparable in quality to Ad Sense and Ad Words. This would allow them to pool their respect advertising networks as well.

On a related note, perhaps someone can explain this to me, but for every site I run, and of the handful of folks I have spoken to about this, we are all in agreement that almost all, in my case >99% , of our search traffic comes from Google. I should expect about 70%. Why is this? It is true that Google attracts a different type of user than the other engines, but I still can't understand the massive discrepancy. In addition, one of my advertising friends (this is someone who runs online ad campaigns for a living) says his company has virtually abandoned taking out ads for their campaigns on anyone other than Google. When I asked him why, his answer is they simply can't get the quality of click throughs for the same cost as they get on Google.

Here's an interesting snippet from a Forbes article titled Why Yahoo! Can't Fix Microsoft:

So why wouldn't buying Yahoo! help Microsoft? For starters, Microsoft is too slow and too cautious to keep up. While Microsoft howled after Google snapped up online advertising specialist DoubleClick last month for $3.1 billion, that's just the latest opportunity Microsoft has missed. In 2005, Google beat out Microsoft to buy a stake in AOL. And while Microsoft carped after the DoubleClick deal, Yahoo! rolled up its sleeves and snapped up the 80% of Right Media it didn't already own.

Of course, Microsoft often moves slow for a very good reason: It doesn't want to cannibalize its cash cows. While Google can launch online spreadsheet and word processing applications, Microsoft can't respond without damaging its powerful Office business. Elsewhere, it's more of the same. Everywhere Microsoft makes money, the Web poses almost intractable dilemmas.

Those kinds of dilemmas would make integrating Yahoo! into Microsoft's corporate culture a nightmare. And Yahoo!'s insiders have too much faith in Panama, the newly installed program designed to boost ad revenues, to give up.
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