Microsoft Bids For Yahoo--A Merger Of The Weak Based On Technologies Of The Past.

Posted by: Bruce Nussbaum on February 1, 2008

Bill Gates gave a wonderful speech at the World Economic Forum in Davos about the need for “creative capitalism” or social entrepreneurialism but with the news of Microsoft bidding for Yahoo, the one thing missing in the deal is creativity or entrepreneurship. This is a merger of old, closed technologies that will probably fail in the competition with Google’s new, open and more agile technologies. It has the feel of that old Time Warner merger with AOL.

Microsoft has spent billions trying—and failing—to morph out of its solid position of monopolist of fixed PC screens into a flexible Web 2.0 player in an open source context. Yahoo was once a great media company that used great content to deliver big audiences to advertisers by being a portal. And yes, it does search too.

What’s hot today is mobility—getting your search, GPS, movies, tunes, whatever—on your cell. What’s hot today is creating your own personal information company on your own screen with tools and apps from providers—something Google does so well. That’s where ads want to live these days—where people are creating their own personal media companies. The best analysis of this deal so far is from Jeff Jarvis over at BuzzMachine. Check it out.

Of course, this deal is all about advertising and audience. Google gobbled up the advertising network players DoubleClick and Microsoft bought aQuantive so now the rush is on for customer bodies.

The deal is also about innovation and the engineering oomph to compete with Google's legion of Stanford-trained engineers. Catherine Holahan at BWOnline has this insight"
"Microsoft also sees the deal as giving it the engineering power to fuel innovations on the Web. Both Microsoft and Yahoo have been criticized as innovation-stagnant compared to Google, which continually releases new products, and boasts of giving technical employees one day a week to work on new ideas."

Most business mergers in general don't work. Business cultures are hard to integrate. Most business mergers of the weak don't work. Minus one plus minus one rarely adds up to plus two. And mergers of archaic business models almost never work.

Let's see if the Microsoft-Yahoo deal (if Microsoft can pull it off despite strong opposition from Google) is the exception. What do you think?

Reader Comments

phil

February 5, 2008 3:32 PM

Since Yahoo and MSN already compete with each other, I would like to know if they're going to keep both their sites or combine them. As you said they both failed on their own I don't see them winning together.
it's like 2 average online games trying to take on WoW (World of Warcraft)

citracyde from StrategyLodge.com

February 5, 2008 7:51 PM

I'm just going to view this merger as a multi-billion dollar acquisition of Yahoo Fantasy Sports, because otherwise the acquired capabilies are duplicative.

The greater question here is: will MSN go away over time or will they uselessly operate both portals?

A more interesting buy for Microsoft would be struggling auctioneer eBay. From a synergies standpoint, integration of their strengths (online auction, skype) are better bolt-on purchases which can be leveraged by Microsoft to create new innovative products and software. Think about delivering eBay brand reverse-auction capabilities to small-medium businesses, integrating Skype on xBox 360, or carefully integrating Skype into Windows Vista to expand its user base and broaden its appeal.

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Want to stop talking about innovation and learn how to make it work for you? Bruce Nussbaum takes you deep into the latest thinking about innovation and design with daily scoops, provocative perspectives and case studies. Nussbaum is at the center of a global conversation on the growing discipline of innovation and the deepening field of design thinking. Read him to discover what social networking works—and what doesn’t. Discover where service innovation is going and how experience design is shaping up. Learn which schools are graduating the most creative talent and which consulting firms are the hottest. And get his take on what the smartest companies are doing in the U.S., Asia and Europe, far ahead of the pack.

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