The Microsoft is evil meme is alive and well this week as many digest Microsoft’s $44.6 billion takeover offer for Yahoo. There’s Flickr users protesting, talk of Yahoo teaming up with Google to block Microsoft’s bid, and general Microsoft is bad sentiment everywhere, even from Google itself. While Microsoft acquiring Yahoo may not provide the ultimate in happy endings to many, it’s really not as bad as some would have you believe.
Google is Afraid.
Google’s response to the acquisition over the weekend was amazing in its veracity. Google and Microsoft have never been friends, but for Google to come out and attack the acquisition as it did can only mean one thing: Google is afraid, and that’s a very good thing. Internally Google believes that a combined Microsoft/ Yahoo will provide real competition to its dominant market position in search and text advertising, the very same position it has depended on to build its until recently huge share price and market cap. Google can preach about open access and open markets all it wants, but Google’s idea of open is only where users access it from one of its many web properties.
More Competition
One argument against the acquisition is that it lessens competition. While in terms of major players it does, a combined Microsoft/ Yahoo will actually increase competition in spaces where Google is dominant, and in some countries all but a monopolist provider. Scale is the key here: Google has it, and Yahoo and Microsoft need more of it. The combined Microsoft/ Yahoo would still have less than half of Google’s market share in text ads for example, but the combined companies would be able to provide a much more appealing product in terms of reach when competing against Google, ie: the increased reach would become more appealing to ad buyers looking to maximize their exposure.
A Stronger Tail
One argument against the deal is that there will be less opportunities for startups to be bought out with Yahoo out of the picture. That is true, but only in the short term. There always has to be a Number 3 player and positions below that, and with Microsoft/ Yahoo coming in at second, the space is now there for smaller players to step into this place. Ask comes to mind, but there’s no reason why we couldn’t see newer players step up. Essentially there will be now one less big player to compete with. The strengthening of smaller players who want to break into the top tier may well see increased flows and acquisitions. In lessening numerical competition at the top, it creates further opportunities below. This naturally rests on the presumption that there won’t be a duopoly in areas such as search, but this is unlikely: there has always been smaller players, always has been, always will be, and the dream of being the next Google will continue to live on.
Yahoo Lives On
Microsoft will actually be a great boost for the Yahoo brand and its many services. The alternatives are nearly bleak in comparison: a hedge fund or similar investment would gut Yahoo to a core rump of (hopefully profitable) services, and sell off areas such as Yahoo News. Google as a partner (either in ads or the unlikely scenario as an investor) would leave Yahoo doomed to be forever a second class player to Google. One of Yahoo’s biggest strengths is still its brand, and Microsoft will work tirelessly towards building that Yahoo brand back to its glory days as the front page of the internet. That goes for the sub-brands as well: Flickr will likely replace Microsoft’s photo sharing suite for example.
Better Service
Someone wrote in the last couple of days the days of building the best product and expecting people to use it has passed, and that’s the problem with Microsoft’s online endeavors today in the age of Google dominance. Microsoft has some great internet products; from Popfly and Silverlight, through to a solid ad platform (that is powering Digg and Facebook) and decent search. A combined Microsoft/ Yahoo would offer the best from both companies in what in theory would be a better all over package. Some may argue that getting to this stage might be difficult, but even Wired notes that merging the two corporate cultures wouldn’t be that hard. Ultimately to compete with Google you must have a strong across the board multi-faceted package, and Microsoft/ Yahoo would have just that.
Conclusion
None of this is meant as Google bashing. Google has done much good and as Google loves to argue, people choose to use Google, nobody is forced to use their services. However markets where one company dominates usually end up seeing stagnation and/ or inefficient pricing and service in the long term. We need a combined Microsoft/ Yahoo if only to keep Google on its toes, to keep Google innovating and providing the best service that it can, to keep Google honest.
I for one welcome our new Microhoo overlords.
Might not happen over night but have you considered the consequences if google looses ?
i hope MS gets Y sooner. but keep the brand.
The “evil empire” are now those bastards at Google, not MSFT. Bill Gates helps poor people, Google just helps their fiancees and themselves.
It’s hard to trust Mugro$oft after all this years. Soon you’ll get to upload 2 photos for free to Flickr and shows more banner ads on your page than your photo collection. Need to add more pics, please upgrade to Microsoftâ„¢ Flickrâ„¢ 2011 Homeâ„¢ Premiumâ„¢ Editionâ„¢
It’s actually very good.. why people think it’s bad?!!
Its all about mobile and China – search is a great business, but long term it also has its limits to growth and when a company like Google cannot diversify out into other things, its multiple will crash to around 10-15 like any directory company. This deal would be excellent for MS and Yahoo.
http://www.infosupply.com
@Your Daddy
BillG didn’t help the poor during the first few decades of Mugro$oft, he too helped himself first and fucked his secretary (ies?) before helping the poor, so no plus point there, and I think you’re missing the point anyway.
2 major players taking 90% of the market – not a hack of a competition really. 3 players with others creeping in – better.
I have to disagree. I think the cultures will clash, not just over technology (BSD and Linux vs Windows) but also over priorities and vision. Yahoo can be re-invented and can deliver more value under better leadership. See http://www.john...signs-on-yahoo/ for more…
Amen — to some clear thinking. Folks here in the Silicon Valley are getting rather emotional about this — not good. Thanks for injecting some clear thinking back into the conversation.
My reaction exactly.
I fully support the MS+Yahoo merger because Google is my frenemy (friend+enemy). And as the old adage goes, the enemy of my enemy is my friend.
Google is so much ahead of the competitors that it is skewing the market and tilting the playing field for innovations. If you ever cross Google, Google is the prosecutor, the judge, the jury and the executioner, and I don’t like any entity wielding so much power over me.
I want to see a real alternative to Google for online ads, web search and online office applications.
Yahoo couldn’t compete with Google and I was concerned that they have essentially conceded to Google in the field of web search. Microsoft couldn’t compete with Google, because well, they are Microsoft and they have their own ways of doing things. But combined Microsoft and Yahoo might provide real competition to Google in some important fields.
Microsoft+yahoo might not be able to catch up with Google in search technology, but there is a real chance that Yahoo and Microsoft combined will provide a viable alternative to ad-sense and online advertisement market. Online office application could go either way, but I do expect Microsoft+yahoo to put up a robust defense before they concede that domain.
In some of the websites I maintain, 80% of the traffic comes from Google. All my monetization of website comes from Google. I think that is just wrong – it means that I am not in control of my website, Google is. Anything that can be done to reduce my reliance on Google, is a good thing.
The only people angry with this are MS shareholders. Way to waste so much cash, they would probably get more ROI by investing that cash into Treasuries or Exxon Mobile.
Competition is good….
Competition is good…
But having microsoft control 80%+ of the Webmail and Instant Messaging industry is NOT competition…. Yahoo would be much better off outsourcing their search and advertising to either Microsoft or Google, but keeping its core (and dignity) intact. Alternatively, split up Yahoo into Search, Webmail, IM, Photos and other parts and sell them to Microsoft, Ask and Google as pieces… I think they would get much more bang for the buck for the investors…
we just need someone else to deliver good search results, I will use anyone else, but for now the best is google and that is the only reason I use them, if MS+Yahoo can created something new and good, i am in.
#2 had a pretty good point. Google offers great services to those on the Internet, but what the company’s philanthropic initiatives aren’t as talked about as the Bill and Melinda Gates Foundation.
Google.org shows all of Google’s philanthropic initiatives, but the media does not care to cover that as much as Google investing in Sergey’s wife’s business.
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Duncan, I liked your closing paragraph about how the acquisition would just keep Google on their toes and keep innovating. I want to see what the company has to offer beyond search and advertising.
Yo Duncan – “veracity” means accuracy or truthfulness, not ferociousness.
I’m just curious – could Duncan and Michael please disclose how much stock (if any) they have in Microsoft and/or Yahoo. I’m not suggesting that it is impacting their reporting but a headline like “…Not As Bad As Some Think” seems to be Duncan’s way of giving his approval to the deal.
I’m under no illusions that blogging isn’t opinion based BTW but this would be a different issue.
Good for the most part, but I can hardly see how Micrö$öft & Yippee merging creates any “room to the top”. I think there’s always room if you can make it for yourself, but I fail to see how this will make things easier for small players/startups in web advertising. Those who rely on advertising as their source of income might benefit though, if MSN/Yahoo starts to offer better percentages for text ads to gain market share. We’ll see..
Good article Duncan. I hope Microsoft will cherish the Yahoo brands like Flickr. Then I see this working. Intergration of overlapping services can happen later. I hope they keep those services as free and easy to use as they are now. Can we now start talking about MS Yahoo! and not Microhoo or what ever. They is just plain ugly names :p
I think it’s very good. So I believes Google will meet the real competition
para 2, sentence 1: you mean voracity, not veracity.
or perhaps even ‘ferocity’, come to think of it
Merging the culture of two companies that size is always hard and only rarely done well. Even with companies a fraction of the size it is hard. If the management team pull off the merger of the culture, they will be writing books about how they did it for the next few decades. They will be rock stars in the mgmt scene … only if they pull it off.
Duncan clearly does mean veracity – but what if Google’s statement is disingenuous? A merger between Microsoft and Yahoo will only hurt them if the combination of the two companies can increase its share of search. It’ll just make them even bigger and unwieldier.
The Google statement boils down to: “Please don’t throw me in the briar patch.”
Agreed with the point that this may create a more viable space in the market for new players. I look for the next wave of innovative companies to break into the market. http://www.managedq.com is one such player that I think will create a huge splash this year in the search market. Google/Yahoo have been essentially the same for a decade, so I think the time is ripe for a new company to make a run at it.
I just wish TechCrunch would invest some of it’s Adsense monies, together with it’s MS share earnings on the server that drive this joint. Maybe a merger / takeover with an outfit that can serve a page at industry standard speeds is a possibility
And now imagine what will happen if Google beat Microhoo to death…
It may look like improved competition at first, but Microsoft has too many other cards, that they have used before. Cards like bundling or tying things to their windows or office applications, making exclusive deals with software and hardware providers etc. How about we saw a microsoft version of google-docs, but tied to Microsoft office, and MSN, and IE version 8 containing special extensions for the new Microsoft Internet monopoly…
Microsoft has all possibilities to tie their Os or office costumers to their internet services.
I think that If (and this is absolutely not certain) they success in winning also the internet as they have done with the OS and with office, competition in the entire IT landscape will be something you can read about in your history books, .. well yes if microsoft does not write these as well that is..
This is indeed a very scary scenario..
Google has in my record behaved nicely all the way contrary to Microsoft.
google is concerned by the implications and the size of a future Microsoft + Yahoo kind of competitor….so i m just waiting to see what google comes out with to fight mircohoo..:)
With such a voracity for veracity, TechCrunchers rarely reach their capacity!
Good story here on the M$ “bear hug” letter to Yahoo!…
http://www.nyti...y/05sorkin.html
Microsoft and Yahoo won’t have cultural clashes: Yahoo’s employees will be fucking GONE if they don’t assimilate into MS culture. MS is the big boy and Yahoo is the weakling; it’s not a merger, it’s an acquisition.
The one thing I can’t see this making any difference to is the core search product. Yahoo and Microsoft are so far behind Google that even together they’re no competition.
This stands to benefit MS enormously though as Yahoo’s web products are more mature and better quality. Tie that with Microsoft’s ability to force them as the default option on millions of Windows PCs and you have a threat (and possibly another antitrust hearing)
You’ll all think this is great, until MS starts injecting MS technology and proprietary standards into Yahoo properties. The first casualty is likely to be Flash being replaced with Silverlight. Microsoft wants to force you to install Silverlight, and what better way to do it. One needs only to look at past MS acquisitions like Hotmail to see how they’ll cram MS technology down the throats of the backend engineers. Will Microsoft support innovative stuff like YUI, or will they expect developers to use MS Expression/Visual Studio?
Google is very right to be concerned about this merger. Forget 80% IM/Email marketshare. We’re talking about the company with a monopoly in desktop operating systems owning the largest portal on the internet. There is a very real danger of MS leveraging their position in evil ways far worse than Google. User scan always switch search engines, people can easily switch ad networks. But it’s hard to switch desktops and dependent technologies.
Better service? This is ridiculous. I give you an example, MSN Games can be played with Internet Explorer ONLY. Yeah, better service.
I wrote an article about this on my blog.
http://www.desi...ke-ie-stronger/
@35 Actually that’s not true. Microsoft and Yahoo have caught up with Google in terms of the quality of their search results. For more information:
http://www.cs.u.../2006-2007.html
I do not like it.. yes I can see it may improve competition at first, but in the long run it is a very serious thread. Letting the worlds largest de-facto monopoly company enter the market to ensure competion – that is smart…
Have you considred the consequences it will have if they succeed in defeating google?
Have you considered the toolbox of dirty tricks they can impose in form of technology agreement and usual bully tacktics to acheive this goal..
Maybe in a few year we will have a pay-pr search internet in addition to the existing Microsoft tax.
Wow, microsoft buying Yahoo will be better for competition???? Am i dreaming when this reporter mentioned that. Damn that what we called Oligopoly. Maybe here some Economics theory would help understand acquisition in the search landscape before we read all kind of stuff coming out from Techcrunch. Im being let down everyday by these reporters here
Duncan – this post is spot-on, and the reason I read TechCrunch. Considered analysis that leads opinion, rather than rolling out old cliches.
How do you actually think Google will react when the deal goes through? What changes might we see?
I don’t think it’s worth to discuss wether this “merge” will work or not. Same with the election. No one knows…
Looks like the web folks still don’t want to realize, that google is not the supersexy superfunky underdog it used to be anymore. It’s not Bill Gates who is renting an island for his wedding.
Google is a big corporation with almost no serious competition in the future’s most important market: the internet.
In the end it’s all about the money and not about improving the world
“A Stronger Tail” — you can take Duncan out of Australia, but you can’t take the Aussie out of Duncan.
Great work, mate. You crack me up.
The overall ling term winner in online advertising will be the player who can offer the biggest audience. If you reach the masses, advertisers will follow quickly
Microsoft have 20 years of experience on technology greed & conquest. Technology greed is Good. They grew up beating Xerox star, IBM, Apple, Lotus, Compaq, Linux, Unix, and almost beating 97% of all U.S companies.
Yes, they are ready to take on Google search engine. Microsoft will someday take over Google and introduce new search engine innovations.
The most interesting about Xerox natural language search, Powerset.
Microsoft & Google can’t buy natural language search. If they did… They lose marketshares. Investors will lose tons of money. They will face Justice department and complaint about illegal competition & sales of Powerset or natual language search engine startups.
I love competition stuff.
NLS search engine is made out XEROX patented A.I SQL.
I think Oracle, IBM, Microsoft, Google does have its own A.I SQL.
My company spends a considerable amount of money with Google adwords. I find their customer service is awful. We are a fairly large company, but for 3 months we have to pay via credit card before they’ll consider letting us pay via a regular invoice/payment system. Credit card is a difficult way to pay thousands of $$ at a time-have to keep topping up the credit card, awkward paper trail… They wouldn’t budge- why should they? they have a monopoly.
We must understand that Google and Yahoo aren’t on the same market in every aspect: in fact, they try to get a share of several markets.
- On search market, google may be still unbeatable even when the two companies merge, because of its focused flagship product
- On communication/identity market, however, Google is easily hurt with such a decision: since the Live ID network can use google accounts for identification, but it does not work the opposite way
- On web office, leisuretime web (social networks, etc), and portal markets, the MS-Yahoo conglomerate would also have some serious advantage over Google.
So, Google is a monopoly on ONE market: search.
An MS-Yahoo company would be a monopoly on at LEAST TWO OR THREE markets in which Google is interested.
In other news: Microsoft is not as good as they think.
Capitalism is a religion, and to badmouth deals like this is tantamount to heresy in the marketplace.
I for one am tired of all the knee-jerk “Microsoft-is-evil” reaction to this. Thank you, Duncan, for posting a reasonable analysis of the possible benefits of this acquisition.