Microsoft Yahoo: Search Realities

July 14, 2008

The Wall Street Journal, the New York Times, and Reuters have covered the most recent Microsoft Yahoo mating dance in excruciating detail. If you have not seen these three media giants’ take on the Yahoo snub of Microsoft’s and Mr. Carl Ichan’s most recent offers, just navigate to one of these links:

  • New York Times here but you have to register: Angle is shift from saber rattling to escalating conflict
  • Reuters here: Angle is “guaranteed ad revenue” for five years
  • Wall Street Journal here: Angle is impasse that will lead to an “incredible dance”

You can explore links galore on and I can’t add much to these reports of this ménage à trois. I would  like to point out that when some sort of deal goes through, search gains a new urgency. Here’s why:

  1. Google faces a real pit bull in the legal squabble with Viacom. Based on my research findings, Google may for the first time face a perfect story: lousy economy, escalating annoyance from developers over the Apps flap, and the privacy monsoon unleashed with the YouTube usage data decision. Now is the time to strike Google, but if the internecine warfare continues, Microsoft may miss this opportunity to deal a potentially devastating blow to the GOOG
  2. Yahoo is in disarray. Open source is a great idea. Cutting deals with Google is a great idea. The problem is that when one looks at the long term impact of these great ideas, the great ideas undermine the foundation of Yahoo. Better shore up that foundation before the basement fills with water and undermines the entire shotgun house
  3. Capturing headlines is not the same as making money. Microsoft itself needs to concentrate its forces, set priorities, and get down to business with regards to [a] Web search and [b] enterprise search. The senior management of any organization has a finite amount of attention and energy. Whatever is available needs to be focused on closing the gap with Googzilla and making gains in the severely fragmented enterprise search sector.

No doubt business school case writers are sharpening their pencils. Unless Microsoft can resolve this Yahoo business, the company may miss its chance at the brass ring. Google can settle with Viacom, mend its fences, and rebuild its lead with regard to Microsoft. Agree? Disagree? Help me fill in the gaps in my understanding.

Stephen Arnold, July 14, 2008


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