I’ve been thinking about MSFT & YHOO ever since Steve Souders went to Google about a month ago. Not so much in regards to an acquisition, but for what MSFT did to Borland during my first year there back in 1996 (I’m old).
If you aren’t familiar with the history, during the battles between Visual Basic (MSFT) and Delphi (Borland), MSFT recruited away 30 members of the Delphi development team, including Paul Gross and Anders Hejlsberg, essentially killing Delphi and with it, Borland. MSFT threw obscene amounts of money at the Borland Delphi team. Literally, tens of millions of dollars.
Why wouldn’t MSFT & GOOG do the same thing? Why not just identify a few dozen of the key people within the company, throw a ton of money at them and kill YHOO from the inside? Facebook did it to the west coast sales team a few years ago. Why not keep that going? It would be cheaper than doing an acquisition.
Then I started thinking about the old Bill Gates spam that came out in the early days. Remember that? If you forwarded an email, Bill Gates would give you a few dollars for each person you sent it to because he was tracking some new email service?
For $45 billion, MSFT just paid about $55 per user for YHOO’s 800 million users. MSFT may have been able to extend an offer to pay key users $100 to migrate their usage to MSN and generate some pre-defined number of page views. They would have still paid out a bunch of money, but it would have been far less than the $45B that they are paying for YHOO and they would have killed YHOO, possibly making them more intimidating to GOOG (maybe). It also would have gotten users on MSN faster than the integration will happen.
Alas, Ballmer didn’t call me for guidance and selfishly announced the acquisition before I could offer my two cents. Two of the more perfect metaphors that I’ve heard are ‘two elephants mating’ (Paul Kedrosky) and ‘Tying the Titanic to the iceberg’ (Andy Baio).
The problem that YHOO has faced, with few exceptions (Flickr, MyBlogLog, Upcoming), for at least a couple of years is that YHOO needs to pander to the lowest common denominator. YHOO needs to make 800 million people come back to their pages on a regular basis. Not an easy task, but it is hard to release services that are unique and innovative that 800 million people will adopt (Twitter is awesome, but only has 800K users). In other words, YHOO has become the Wal-Mart of the internet.
There is nothing wrong with being Wal-Mart mind you. Wal-Mart is a big, consistently profitable company, but don’t expect the next big thing to come out of it. The company will be too conservative or too slow.
In the end, the MSFT acquisition of YHOO will go through. The integration of 3 different ad plaforms (YHOO, RightMedia & MSN) will take a really long time. This will frustrate advertisers who will migrate to GOOG (for contextual) and Facebook (for display). The really good people within YHOO (the people they should have targeted in the first place), will get frustrated with the stock price, the direction of the integration and the idea of working for ‘the man’.
If there is a negative impact for my friends, I’ll be bummed. They are smart, they will land on their feet. I’ll be more disappointed if the YHOO services that are really interesting, like Flickr, like MyBlogLog, like the stuff coming out of Brickhouse, gets mitigated to the back burner in favor of less exciting services that pander to the masses.