Microsoft & Yahoo – Yep, We Can Say Goodbye to Both

Why MS buying Yahoo will not change anything.

INTERNET SEARCH is the purest form of customer service & “sales” EVER.

There are virtually zero barriers to entry (there are over 300 by our count).

Users/customers can switch in the time it takes to type and bookmark a new url.

So, if you can’t deliver results that are satisfying to users – they type a new url and you’ve lost them perhaps forever. Some brick & mortar stores get customers coming back merely because it’s convenient and others get customers by buying up all the competition or by driving them out of business.

For internet search, there’s no discounting, no free shipping, and not even an easy to use web site really makes that much difference.

The bottom line is results and at no cost to the consumer, they can switch at any time.

Google wins this purest of competition hands down for a reason.

They deliver what people want & expect fast and accurate enough. Of course, it’s not perfect but it’s what people want today, right now and the results are enough so they come back. That is why they are still growing while their main competition has stagnated.

You can test this out yourself. Pick a random topic and do a search on Google, MSN, Yahoo & Ask … Other than very specialized searches (see our link above) – Google wins by a landslide in better results 90% of the time.

That is why MS buying Yahoo will matter very little – combined, their market share will be 30% of so to Google’s 65% but I am willing to go out on a limb and say if MS actually buys Yahoo, their market share will actually drop 10% to about 20% or perhaps to the % that MS holds now – about 12%.

Because 50% of Yahoo users loath MS

MS’ search function is so weak that they’ve tried to pay people to use it! And still it’s a failure (program started last summer) … in fact, 66% of Microsoft EMPLOYEES use Google for seaches … surprise – at the EXACT same percentage as “normal” people.

The only real reason MSN and Yahoo still have search numbers are that people are lazy about changing their home pages (or don’t realize they can change it) … I know someone who still has an Excite Start Home Page (yes, I was surprised to see that Excite still actually existed) … and Yahoo of course has dozens of home page & useful features that people who like them just for convenience sake, they can just scroll up and types in a search bar instead of going to but if MS were to take over Yahoo, MS would slowly chip away and force you to sign up for their ID or a Hotmail account to access anything and people would switch in droves. Everytime MS buys an online community, the first thing they insist on is that you sign up and get an MSN/MS ID to access anything.

Yahoo already had enough trouble in annoying FLIKR users when they insisted that people log in with a Yahoo ID name & password – MS will only be that much more annoying. MS doesn’t seem to have realized that is why hardly anyone wants anything to do with MSN Groups or MSN Forums, etc … because of having to sign up for all things MSN to read and sign up for it – while Google & Yahoo want you to sign up for email and be registered for many apps & features, for the most part, they do not care if you want to continue to use another email address as your signin one – but not MS, if we can’t track you 100% of the time, you can’t come in.

MS doesn’t trust you the user and wants complete control. Case in point – in Apple’s iTunes, you can click one button and the iTunes store is NOT listed and out of sight, out of mind. To Apple, of course they want you to buy tracks on iTunes but hey, if you’re not going to, you’re not going to – you’re an adult, you can decide for yourself what you want. With MS, it’s our way or the no way. This attitude is fine if you’re selling server software or even software 10-20 years ago – there was no internet, no open source, you had to look at the fearure set and decide if it’s what you want – just like digital, your choice was YES or NO. And MS won that battle by controlling your choices either directly by undercutting competition, buying them up or indirectly by buying up their distributor or locking in exclusive deals.

So, if MS buys Yahoo, they will pretend to play nice for a few days, then point out Yahoo is a stupid name and start changing things to LIVE! (as if that was not an idiotic WTF name already?) – so Yahooligans will start to leave the company in droves leaving only those who nod silently … and pretty soon it’s all folded into Redmond’s control.

Well, maybe higher than 50%.

Steve Ballmer might be a billionaire but he had lots of help …

Steve was the right guy 20 years ago. Bill Gates needed a sargeant who could yell at people and who could talk up the sales game to the troops in going out and selling DOS, Win 1.0, servers, Office, etc … and someone who could help gloss over ethics (see the hundreds of government indictments & settlements) in getting things done. He was fine for a time when you could control distribution and the marketplace through aggression, assertion and cutting some legal corners but now in the age of the internet-open source-linux-open distribution, he is still trying to fight the last war of 10-20 years ago. He is the old general (now) who only fights what he understands. I’ll buy up market share and then tackle Google by cutting them off.

Only problem is now he’s standing at the mouth of the Mississippi with ONE MSN sandbag but he’s convinced if he shouts loud enough and throws enough money into his one sandbag, he can divert the users.

10-20 years, if you spent money to implement Windows server, you’re not going to switch after building your network and system … but the internet and in particular internet search is not that battle anymore. Anyone can switch in 2 seconds to another search engine but why don’t they? Buying Yahoo & Ask and a dozen others won’t change anything – typing and typing takes about exactly the same amount of time. No rewiring, no software to load, no apps to buy, no one for MS to undercut, no one for MS to underbid … but Steve Ballmer doesn’t realize that – instead he wants a legacy other than BG’s bad cop character. He think merging with Yahoo will get him into striking distance of Google and then if he pays enough people, he can claim the greater piece of the $50-$80 billion dollar online ad pie and retire to eat some real pies. He can in theory control 30% of the outlet where people buy ads to place on internet search BUT for that to equate to an ongoing business of 30% of the ad dollars, he needs people to continually visit MSN/Yahoo search and that is simply not going to happen. If MS buys Yahoo, there will be an immediate chunk of users who leave just to protest MS … then there will be another mass exodus when MS really takes over and insists that people have a Live or Hotmail address to access anything … MS will simply muck it up and the problem is people can switch very easily.

Gee, where else can you find a free email address? Or TV listings? Or the weather? Or stocks? FLICKR is great but still great under MS or should we switch to Picasa or about 25 other choices? That’s something that Steve Ballmer doesn’t understand -what he doesn’t get is that people on the internet can switch at the drop of a hat … GeoCities? Friendster? … Or that popular sites now like Digg or Fark or ArsTechnica are built on the rubble of companies/sites that people abandoned like SlashDot and dozens of others … if MSN weren’t part of MS, they would be considered abandoned already.

MS Couldn’t Integrate a Company If It Really Tried

MS’s culture used to be arrogant & aggressive alpha males (even the women) which while annoying and sometimes illegal is at least a path that can lead to success … but that time is gone because they’ve all left for greener pastures or fresher kill … leaving the remaining employees? Those left have successfully navigated the walls of corporate fiedom and politics … leaving only the arrogant bureaucrats … so not only do they believe they are smarter than you, they will show you with their filing system and forms in triplicate. This is why it took MS 6 years and $6 billion dollars to come with Vista, the WG authentication and the monthly virus program – that is the creativity of a bureaucrat. Can you merge these guys with the DMV?

More Bad News For Shareholders

Being an MS shareholder is already tough enough – here’s a company that throws off cash from two divisions to the tune of $12 billion dollars, their other divisions randomly lose $2 to $6 billion a year on Microsoft’s attempt to be hip & cool in automobile technology, video games and portable mp3 players. The Xbox division would require selling 1-billion XBoxes to break even but hey, it’s only the shareholder’s money … but now for the first time, MS is going to spend $20 BILLION in cash and either throw in equity as in stocks or borrow the rest to pay $45 billion dollars for a whisper of a whim.

It was actually smart of MS to pay $240 million for a sliver of a sliver of FaceBook – valuing the company at $15 billion because MS has essentially set the price to prevent Google or anyone from buying it cheap. $240 million to own .2 of FaceBook is much better use of corporate funds than the quarterly loss at the Xbox division.

But to pay/offer $45 billion for Yahoo? This is as if Hugo Chavez decided to invite Britney Spears to be his first lady … it is not only not going to end well, it doesn’t even sound right to begin with – if it smells like duck s***, is that how the saying goes? Steve Ballmer would be better off trying to marry Carla Bruni.

ZDNET Might Be Right, This is the Beginning of the End

Sure, it took ZDNet 753 feature articles where they are scarily off-base but this one might actually be right.

As the article points, the online ad fight is about money but no one questions why MS has to chase it – as the author points out, why not buy up platnium futures – there’s huge money in that but the bigger problem is this …

Because after 9 months, there won’t be a Yahoo – MS will chase away all the non bureacrats at Yahoo and merge all the sites into MSN/Live. 50-75% of the regular users at Yahoo will pick up and leave and while MS might hold 30% of the online “potential capacity” of internet search, they’ll have spent $45 billion to buy maybe 5% more users and more ad dollars … at what cost? MS will have tapped all their reserves and go into long-term debt for perhaps the first time since their early days – not a smart way to spend $45 billion. But try telling Steve Ballmer he’s not smart about technology is like trying to convince a 3-year old he should eat the lollipop later.

Other Suitors?

No, Apple is not going to buy Yahoo. Apple could fling open the doors of .Mac and replicate most of the features of Yahoo – no need to spend $45 billion to buy a LESSER name. While the name Yahoo is nice, other than maybe one of the Chinese search engines coming on board or maybe India’s Tata who will buy nearly anyone … no, there really aren’t a lot of suitors because Yahoo is a unique brand who’s main appeal is that it’s not MS or Google. Yahoo shareholders probably want the deal to get max value but if MS buys Yahoo, that is the end of Yahoo and probably MS … so I suppose if you hate MS, here’s your chance to root for the carnivorous fungi that devours the ant from within before shooting outward and killing the ant (close up footage from Planet Earth TV series – not safe for the easily queasy 🙂 ).



Filed under Advertising, Computing, Financial, Internet, Marketing, Media

17 responses to “Microsoft & Yahoo – Yep, We Can Say Goodbye to Both

  1. Pranav

    well I have better idea for MS if they want to make money from search. Hire Good Programmer and built better computation search program than spend money on yahoo. God If I had money, i would fire them right now.

  2. Trevor

    > Hire Good Programmer and built better computation search program

    Actually, the very sad thing is that Microsoft already has some great programmers. At least the ones I’ve met, as individuals are very smart, very aware, and can do some amazing things.

    I’ve got to think that it must be something about the Microsoft culture and management or something, because we all see the horrible bug-filled restrictive frustrating drivel that Microsoft unleashes on the world. Death by a thousand paper cuts!


  3. Tom B

    “I’ve got to think that it must be something about the Microsoft culture and management or something, because we all see the horrible bug-filled restrictive frustrating drivel that Microsoft unleashes on the world”

    I’m sure MSFT’s coders would love to have a BSD kernel and coding tools like Apple’s XCode, but they are constrained by MSFT’s sheer size. If MSFT tried to take the time to re-do their products RIGHT, it would be a golden opportunity for Apple to attack Windows’ market share. Let’s face it; it took 5 years to slap eye-candy on XP and call it “Vista”.

    Microsoft is the Former Soviet Union, hemmed in by the very forces of capitalism, slowly collapsing under their own weight.

  4. Danby

    I remember reading, a couple of months before the Vista release, a blog by a MS programmer. He was the guy in charge of the shutdown function. That’s all. Just the shutdown button on the start menu. He told the tale of writing the spec for the function of the shutdown button. Every week there would be a group meeting between him and the three managers assigned to him. They would hash out a spec for the functionality of the (tiny) piece of code he needed to write. Then once a month the spec would go off to the start menu team. They would provide intelligent comment. He would revise the spec. On occasion that team would approve the spec. Then it would go off to another team for approval. A month later he would get the spec back with comments. Each iteration took a month at least. It took 4 years to get his spec approved, and 1/2 day to code it. 4 years. 3 managers and 1 employee. 4 years. Any wonder why MS can’t write code to save it’s life?

  5. David

    Unless of course ISP’s start giving preferential treatment to one site over another, a.k.a. net non-neutrality. For example, if AT&T sells better access to Microsoft/Yahoo search (who pays for the special treatment) then the AT&T customer, fed up with the poor response from Google, switches to Yahoo. However, in this case it’s not because of competition. Rather it is because of a lack of competition. A move like this would also significantly raise the barrier to entry into the search engine business. All in all, net non-neutrality is not good for the Internet. Something to watch…

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  8. I very much agree with you. See my own post for my full take.

    Needless to say, buying Yahoo! would be the stupidest thing that Microsoft would have ever done – and it would cost the company to do so. Bill Gates never liked debt, so he ran MS from day one with zero debt! (Numerous articles on that subject.) Now, Ballmer wants to bet the company at its most risky moment and take on debt to do so?!!! How crazy can he be?!

    Well…if this goes through, then Ballmer would end up being known as the guy who bankrupted Microsoft, destroyed the company, and put it out of business – because that’s what is going to happen if the deal goes through.

    And FYI – I do have a yahoo account, one I pay for; and if the deal goes through, I’ll be taking my business elsewhere – likely get my own domain and find a good hosting provider so I don’t have to worry about that kind of thing again.

  9. What you are saying seems correct. MS is so cumbersome and its code full of bugs, how could it compete IF there is competition? Search engine wars bear that out.

    When I trained for IT, it was on MS, but when I actually started working, I was surprised at how many non-MS apps were being used, and how much better and easier they worked.

    It’s like Vista. Who is going to use this version if they have to re-license all their apps because of compatabilitiy issues? It’s this kind of unco-operative leverage that is killing MS. It’s their way or the highway. Got to use their approved drivers, their apps in their catalog, etc.

    I know plenty of people who have just dumped the Vista and installed XP, or even 2000; so the old office suite works and also all their “legacy” apps. Who wants to retrain constantly just because MS comes out with a new platform that has compatability and training issues. No way, TCO is better just to change the op sys, not everyting else. MS has it bass akwards.

    However, what realistic option for an operationg system do we really have, Apple withstanding?

    Hey, for about $300, you can get XP at most business outlet stores. That should be sending a message to MS about Vista, and their practices in general.

    If there were a plateform out there that is non-MS, and was cost effective. I’m sure people would step up and come in droves.

    Hey, Apple for a PC machine. For me Apple is just as stubborn. Why does a plateform have to associated with a machine, a MAC?

    Why can’t programmers make a kernal that can sit upon any hardware config, and then be compatable to apps without the upsmanship? For my money, I think this would be sound business planning. Just think how many versions of a program like that would sell.

    If MS & Apple though like that, we wouldn’t have this kind of performance vacume.

    Google op-sys anyone?

  10. I’m sorry, but one of your first statements, that barriers to entry are non existant in the search market, makes me doubt you’re thinking straight.

    It’s *incredibly* hard to index the internet. That’s why MS has struggled to do it, and to do it well. The server farms required alone are one big issue, and the next is finding the highly talented developers to make it happen and to keep it working.

    Actually, that’s a lie – the indexing isn’t actually the big problem. The biggest problem are the number of people trying to game the system. The sploggers, the spammers and the cretins! They’re the ones who make indexing so fraught and so hard to get right.

    Yahoo don’t do a bad job, to be honest. MSN do a terrible job. And Google do it about best.

    As a software development company… well, MS may be acting a bit like a dinosaur, but don’t forget how massive they are. Google is tiny in comparison. Google don’t make Intranet systems. Google don’t make SQL servers. Google don’t make ERP systems. Google don’t make portable OSs. And while some MS departments are stodgy, others are quick witted and sharp.

    (METROXING: You’re absolutely right in that running a SUCCESSFUL search market business is no walk on the park but that’s true of any business but if you follow our link to 300 search engines reviews to the bottom of the list, those people clearly have no business starting a search engine business but if you know some HTML, know how to buy an url, you’re on the internet … of course, your odds of even competiting are extremely remote but that’s like the guy who opens a hot dog stand … and for that, you actually need to pass some health inspectation and get a license – to srta your owns search engine, not even as much …).

  11. JH

    rpeddle99 – You just described Linux. It exists right now, runs on pretty much anything, and supports more hardware and applications than any other OS ever.

  12. The bottom line is results and at no cost to the consumer, they can switch at any time.
    >> Sure & the results must be displayed fast & be relevant.
    For this Google’s algorithm is far much better than Yahoo’s or Msn’s one.

    Paid to use Msn Live search + IE7 is exactly what does Micro$oft paying to hide lack of innovation & relevancy. There’s no talent involved in paying users to use products they won’t in a normal case…

    in fact, 66% of Microsoft EMPLOYEES use Google for seaches
    >> The reason is simple it really more efficient w/ less annoying ad & graphics everywhere

    MS would slowly chip away and force you to sign up for their ID or a Hotmail account to access anything
    >> Pay me or become a forced prospect who will received emails & newsletters from me as often as I wish.

    MS doesn’t trust you the user and wants complete control.
    >> M$ hates our privacy.

    So, if MS buys Yahoo, they will pretend to play nice for a few days, then point out Yahoo is a stupid name and start changing things to LIVE!
    >> Exactly what I think.

    If MS buys Yahoo, there will be an immediate chunk of users who leave just to protest MS …
    >> Of course as a great deal of people have admiration for Google & Yahoo!
    Not at all for the ganster M$oft.


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  15. JH – correct. However how many people actually USE Linex? I know of only one business in my little world, and it has been a struggle for them.

    Proof is in the putting. I know only 1 IT pro that is using it on a regular basis. If your helpdesk is resolving MS OS and apps difficulties, it leaves precious little time and effort to use Linex or Apple. I’m an old duffer now, having used MS DOS since 3.01 and we were booting from floppies. MS is a hard habit to break.

    Point well taken though. Linex, promote your plateform, and “sigh” keep the look and feel similar to MS, as much as legally possible.

    Clopinettes – index the internet? You are exactly right. It is beyond difficult. It is impossible in my opinion. As admins are changing their site maps and FTP to servers every day or so, how can any crawler actually find everything that is secreted in every sub-domain and tertiary level document?

    No way. SEO is not really so much actually finding and indexing documents as it is capturing cache and clever tags and header info, and setting up scripts that direct the crawler. It’s business, not sevice of a directory. Indexing has be redirected to serve commercial interests. Why settle for a few searches at the top of the pile, when we can subvert the whole system to serve our needs?

    So as it is an ever changing morass of data, how can we ever index it in a meaningful way? I think you are totally right. Jeeves style pre-digested is a step in the right direction, and of course MS has added their manipulative structure to that.

    One educational client I had used “net-trekker” and firewalled other search options. Of course you have to pay, but it is time effective to be free of a measure of brute force “hits” like google, and the redirection efforts of MS & yahoo, and the ever expanding “sponsored” search results.

    That stuff has no intellegence and directs you not to what you want to find, but to what they want you to see, related or not, or to what a plethora of others have landed on. Who cares? Google is just like a herd of cattle. Where a few go, all the rest of them go.

    Is that stateful, I ask you? I support others who want to create their own search engines and plug ins. As long as it is stateful, I wouldn’t mind paying a fee to have it sorted out for me impartially. We are paying anyway, in the form of lost time.

    I know that seems far fetched, but I have seen net-trekker sort out scholastic style info into searches that students can use, and that allows for less goofing around and frustration, and more time using the PC as a tool for productivity. You know, actual results and success?

    It’s like my phone. It’s made as a tool to communicate information. But on my phone, almost all of the calls now are people trying to sell me something. or simple wrong numbers.

    Search engines are like that. They are busy now with selling stuff or wrong numbers. Who cares about indexing the actual directory of what is published in the greater WAN?

    The efforts of MS compleatly show this. Why do they want the info? Of course, to divert the proper use of indexing, to subvert it to making money and exerting market control. It is not enough that their products are everywhere. They want it to appear that MS is the only thing that exists. Keep telling people that enough, and after enough repeats he will accept it as fact.

    To hades we who actually want to use the index for research and communication. Why support that when there is so much money to be made?

    Just because it’s legal doesn’t mean that it is ethical.

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  17. I completely agree with you. Acquisition of Yahoo by Microsoft will just destroy shareholder’s wealth in long term.

    Microsoft should focus on software business. There is so much that could be done in software space.

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