Yahoo Bites Microsoft. Or, The Secret Of Google

Man bites dog; Yahoo bites Microsoft – now, Yahoo can say its bite is bigger than its bark.

Yahoo wins! Its stocks shot up 19% Friday. Microsoft stocks shot down 1.3%.

Microsoft contemplating buying Yahoo!? Yahoo deserves the Gold. I look at it differently – it’s the smaller fish enticing the bigger fish to eat it. And it looks like the bigger fish is eager enough to swallow the bait. Some papers have reported that the merger talk is dead. That talk is cheap but not dead. I say reports of its demise have been slightly exaggerated.

Eric Auchard & Daisuke Wakabayashi (4 May, Reuters) report that analysts and investors are thinking of ‘a strategic partnership’ between Microsoft and Yahoo, not a merger. I doubt that that will prosper – William Gates works in partnership only with Bill Gates.

Microsoft wants to be #1 in everything. In Search, Yahoo is #2. Microsoft’s MSN is #3. Microsoft doesn’t want to be #3. I know the feeling; I myself don’t want to be #3 or only #2; I want to be the #1 English writer from the Philippines – at least #1 when it comes to titillating the head, or #1 when it comes to exploring the thin dividing line between genius and insanity. Microsoft used to be #2, remember? WordPerfect #1, Word #2. Netscape #1, Internet Explorer #2. Borland #1, Microsoft #2. Then Microsoft marketing showed itself to be #1.

Actually, Microsoft doesn’t want to outsmart Google; either it won’t – it prefers the thrill of its own WordPerfect Strategy (Windows was the strategy), or its Netscape Gambit (Windows was the gambit); or it can’t – it’s not smart enough. Now, Google has shown the world that Windows is not the Vista to the future. So now Microsoft is searching for a strategy; in the meantime, Microsoft will have to be content that the search is the reward. Instead of using its marketing genius, it wants to out-market Google, using its marketing muscle. The genius of Google lies in reinventing itself; the genius of Microsoft lies in marketing.

Yahoo owns Flickr, in case you don’t know. A fair warning to Microsoft: I think Flickr is super but Yahoo is dull play when it comes to Storage & Retrieval; I think Word is superb but Microsoft MSN is sleepy when it comes to Search & Replay. For sheer beauty, MSN deserves the Gold but doesn’t get the reward money.

The Examiner (4 May, examiner.com) reports that analysts doubt the Yahoo-Microsoft merger will push through, because ‘the two companies have too much in common.’ Commonly, they are both behind Google.

The Associated Press (4 May, chron.com) reports that David Hallerman of eMarketer says, ‘There’s too much overlap between Microsoft and Yahoo, and to try to merge the company cultures of two large companies like that in general is hard.’ But David, you are assuming a marriage of true love, not a marriage of convenience. Or a wedlock of competitive advantage. Microsoft is always looking for competitive advantage, not blazing new trails.

Michael Liedtke (4 May, washingtonpost.com) reports that Standard & Poor’s equity analyst Scott Kessler says the Microsoft-Yahoo deal will ‘address the major problem that both companies have been trying to deal with.’ Famously, both have been trying to deal with Google.

Michael puts the words in my mouth:

Google’s whirlwind success after just 9-1/2 years in business also has galvanized other media trying to plumb new revenue channels in hopes of approaching Google’s outlandish profit margins.

No, the word is neither ‘plumb’ nor ‘channels’ – that’s mixed metaphor. Yes, the word is ‘outlandish’ – the secret of Google’s success is that it’s very creative; it thinks outlandish thoughts – for instance, have you seen pet iguanas in Google offices, or at least its new incarnation, the sexy iGoogle? Now Yahoo and Microsoft are thinking outlandish too, thinking of merging against Google.

Dina Bass & Jonathan Thaw (4 May, chicagotribune.com) report that Peter Misek of Canaccord Capital in Toronto says ‘it may take Microsoft a decade and tens of billions of dollars to catch Google with internal development.’ Not so. I think Microsoft can do it in 31,536,000 seconds (that’s exactly 365 days, using Word 2003’s Tools Calculate). But Microsoft will have to do what it hates to do; to become bigger, it will have to become smaller. Bill Gates shouldn’t have been stubborn and should have taken advantage of the genius of his competitors years ago when they wanted Microsoft to break up.

Microsoft needs to reinvent itself. It’s not too late. It’s impossible but not too late.

Fast Backward: Jim Lehrer reports (6 September 2001, pbs.org) on the decision of the Justice Department not to break up Microsoft into bits & pieces, and quotes Peter Coffee, Technology Editor of E-Week, as saying, ‘Microsoft, for the most part, has grown as an organic company’ and therefore ‘finding the dividing lines would not be easy.’

Fast Forward: For Microsoft, finding the dividing line between genius and insanity would not be easy.

Copyright by Frank A. Hilario, May 2007