Gosh.. this does not seem to end. I wish this went one way or the other and we were spared the glut of news around this on every tech board. Microsoft needs Yahoo to be anything in the internet space and it is as simple as that. For Yahoo it is a good exit plan. But for consumers and internet users, a merger is not good news. We want more competition rather than a few monopolizing the net. Regardless, I wish this would end and we can move onto some more interesting tech happenings and some new ideas in hot areas like mobile.
MT
June 26, 2008
Microsoft is trying to buy your searches. The new program, dubbed Microsoft Live Search Cashback, sounds like some sort of cash rebate program similar to what you see in loyalty programs at retail stores or credit cards. Is it a wise move for Microsoft ? Will it turn the page for Microsoft vis-a-vis Google’s overwhelming market share in search business ?
We think the idea has some merit but for the most part it is an act of desperation. After all, searches are not for sale. People search in the hope to find good matches for their searches and advertisers go to search engines where they see consistent scalability and return on ad dollars. Microsoft has to do better on various other aspects of search like better searches, better ROI to advertisers, more relevant ads. Today, a small number of folks use Microsoft Live search - roughly 9.1% of US searches are done via Microsoft Live vs 61.6% for Google. Simply buying searches is not going to do it. This is classic Microsoft, if you can’t win on business model or innovation, use financial muscle to buy your way in. This may work but only in large partnership customers of Microsoft who will be hounded by Microsoft’s aggressive sales personnel to replace Google search box with MS Live search. For the vast majority of consumers and businesses however, their Google search box isn’t going away anytime soon.
MT
May 22, 2008
Activist investor Carl Icahn is forcing Yahoo to re-discuss a merger with Microsoft. Mr Icahn believes that Microsoft had an attractive offer which Yahoo should take. This is classic Wall Street influence on tech-centric Valley. When firms mature, they sometimes need to submit to stock market behemoths and can’t go their own way. Microsoft is interested as Yahoo might otherwise create a search outsourcing relationship with Google which would be not too pretty for the Redmond giant. Yahoo just concluded a test launch of Google search outsourcing which was a great success. Using that as a bulwark, CEO Jerry Yang of Yahoo declined the Microsoft offer earlier this month. Yahoo remains hot property and both Google and Microsoft want to keep it in their camp. Makes sense. Whichever camp Yahoo joins would get strengthened relative to that party’s prior position. The irony is that Microsoft is fighting so hard for a No 2 spot in an area (online advertising). Historically our friends from Redmond never settle for less than no 1.
MT
May 19, 2008
Google is very friendly with Yahoo these days. That is incredible, to say the least. These are cut-throat competitors in mobile advertising and search arena. Interestingly, the common enemy from Redmond is bringing these two firms together to drop the advertising competitiveness and try to work in complementary fashion. If it passes US anti-trust scrutiny, Yahoo is discussing a long term partnership with Google to source ads from Google and place them alongside Yahoo search results and emails. It seems Google ad leads to a much better pattern match and hence higher profitability than Yahoo model could achieve on its own.
If Google can sign a long term partnership with Yahoo, then Microsoft will be discouraged to make further bids. After all, Microsoft is interested in Yahoo with its intrinsic properties and search facilities (Yahoo’s internal search initiative is called Panama). A Microsoft bid for Yahoo which uses Google search technology in its search platform would not make any sense.
Both Google and Yahoo bottomline will benefit from the said partnership between the two, though, by going this route, Yahoo would essentially validate that Google is indeed the pre-dominant search technology platform. Yahoo will become more of an aggregator at that point in the search space rather than a search firm itself.
With a Google-Yahoo alliance, Microsoft will probably go after Facebook or other smaller social network portals to boost its internet offerings. There are rumors that Microsoft has discussed an acquisition with Facebook, the fast growing social network. Will Mark Zuckerberg at Facebook sell or should he sell to Microsoft ?
MT
May 9, 2008
Microsoft withdrew its $47.5 billion bid for yahoo this past weekend. Microsoft came out a winner on this one. It saved them from a messy merger and one which was disliked by the rank and file of Microsoft employees. They left a top online competitor in limbo state searching for answers and responding to lawsuits, criticisms from shareholders and employees alike. $47.5 billion was the appreciated offer based on Microsoft raising the bid from $31 to $33 a share in last few days. That’s a lot of money left on the table for Yahoo team and shareholders. It would have been a great exit strategy for an iconic internet firm which revolutionized the portal concept.
Can Yahoo do it alone ? Sure. But with no new breakthrough business models and powerful Google capturing it all in the online ad space, Yahoo faces an uphill task. The likely outcome of this saga is that Microsoft will swoop in later and get the Yahoo prize at a much lower valuation; if not that, Yahoo will loose further market share to Google and the team in Redmond will shift its focus elsewhere eg forming alliances with AOL or FaceBook etc. Yahoo is discussing a deal to outsource the ad display to Google - that will essentially validate Google’s dominance as the pre-eminent search engine with most bang for the buck. That is the reason we feel Yahoo should have taken the bait even though we feel any combination of Microsoft or Yahoo could not dethrone Google from its leading perch. As stated before, innovation does not happen in a box however you assemble that box.
MT
May 5, 2008
Microsoft announced disappointing results today. Does it have any growth engine, not a significant one. With all the efforts in gaming and online services, Microsoft is still dependent on its two powerhouses - Windows OS and Office, for bulk of its revenue and profitability.
Meanwhile Microsoft is locked in a long-winding battle with Yahoo management for a takeover of the latter. Combination of two laggard firms (in online space) like Microsoft and Yahoo is not going to fix their problems. Long term innovation does not happen in a box under corporate control. While these two firms negotiate and tussle for a decent deal, others like google, facebook, linkedin, MySpace continue to make hay in online world. On the media front, Apple and other online music/video sites continue to tear apart existing music and video monopolies with free impunity via sheer product innovation and forward thinking.
Speaking of innovation, in the mobile ad space, breakthrough product and solution innovation by AdMob, AdInfuse, Rhythm New Media and CellStrat (wink!) of course will create dominant models of the mobile future. We are a firm believer in garage-style innovation, power of free and truly democratic media/internet and long term dominance of new business models which are creative enough to turn the existing models on their head.
TR
April 25, 2008
