The news of Microsoft’s bid for Yahoo! broke in the Saturday papers, and there’s a mass of coverage. It’s worth collecting some of the initial comments. Both companies spread wide, and some people – and companies – will find themselves buying services from Microsoft when, perhaps, they deliberately chose not to. In the UK, for example, a lot of broadband internet is supplied by a BT/Yahoo! joint offering so there’s an immediate potential impact there.
Google certainly think it’s worth reacting to. They fielded David Drummond, Senior Vice President, Corporate Development and Chief Legal Officer; and he immediately raises the spectre of Microsoft’s “legacy of serious legal and regulatory offenses” to encourage regulators, and consumers, to sit up and take notice. And to position Google as the champion of the open internet.
In business terms, does it make sense? What have Yahoo! got that Microsoft haven’t? The Guardian tagged the bid as and admission of failure by Microsoft and an attempt to “buy its way into the 21st Century”. Microsoft, it says, maintained its dominance of desktop and office software; but Google ate its lunch in search and, along with the open source movement, is making inroads into the applications market. Yahoo! dominated search until Google came along, but is there any way that pooling Yahoo! and Microsoft’s resources would magically create a Google-beater here? There’s analysis of this one from The Observer (that’s The Guardian‘s Sunday sister) and one interesting quote is from a financial analyst who says “We see Google as a search business, but it is a media company that makes all its money from advertising”. Would the combine challenge Google in this space? Adding their two market shares doesn’t win, and mergers don’t create new ideas automatically. But it’s perhaps a better indicator of why Microsoft’s made the move, and where it thinks the IT business is going. And of a shift in the media business too.
Forrester’s Charlene Li blogs about this in Groundswell and about the way both companies need to play catch-up in social computing.. She looks at the jewels in a potential combined portfolio: Flickr and del.icio.us, Microsoft’s investment in Facebook, and so on. She raises the possibility of Yahoo! selling Google its search advertising to defend itself (remember this is a hostile bid), raising the cash to stay otherwise independent. Google did this kind of deal with MySpace.
This isn’t an enterprise IT-oriented merger bid; indeed Computerworld‘s reaction is that it might distract Microsoft from the enterprise’s primary business with Microsoft which is precisely desktop and office software. It’s about the social web, advertising and media. But if (when) social networking finally gets adopted by enterprises – Faceforce, the link between Salesforce.com and Facebook, is a straw in the wind – then there would be an impact there too. As Charlene puts it, “people go where their friends are”. There’s a lot more comment out there, as you’d expect; no substitute for going looking for yourself – no doubt via your favourite search engine …
Yahoo! and the future of the Internet Official Google Blog, 3 Feb 2008
Microsoft tries to buy way into 21st century The Guardian expert comment, 2 Feb 2008; alternatively, go to the homepage at guardian.co.uk and search Yahoo Microsoft
Microsoft’s bid for Yahoo!: What it meansCharlene Li, Groundswell, 1 Feb 2008
Would a Microsoft-Yahoo deal out Google Google? Computerworld, 1 Feb 2008
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