An Exceptional Rumor: MSFT to Buy Yahoo AOL Combo

September 26, 2008

I saw this post on Venture Beat here. Then I saw a follow on story on Peter Kafka’s write up for Silicon Alley Insider here. I am delighted to point out that these writes up do not a done deal make. I find the notion fascinating, and I hope it comes to pass. Google will probably buy another dinosaur skeleton, reinstate day care, and design more lavish housing for the NASA Moffett Field Google Housing Units to celebrate. Please, read these two posts. The plan, as I understand this speculation, is that Yahoo gobbles up the wheezing AOL. I presume Yahoo will be able to work its technical magic on AOL’s infrastructure just as it did’s. Yahoo took two years to rewrite’s code, thus allowing other social sites and bookmarking services to flourish. Once the dust settles from that MBA fueled explosion, the Bain consultants will shape the package so that Microsoft can swoop in and snap up two hot properties, solve its search and portal problems, and catch up with Googzilla and chop off its tail.

When I worked at Booz, Allen & Hamilton, we called the Bain consultants Bainies. I can’t recall if we used this as a term of affection or derision. I like Bain and the work it did for Guinness just about 20 years ago. You can refresh your memory of that project here.

Let’s walk through the search and content processing implications of this hypothetical deal. I promise that I will not comment about SharePoint search,’s search, Outlook search, SQL Server search, Powerset search, or Fast Search & Transfer search.

  1. AOL has search plus some special sauce. At one time Fast Search & Transfer was laboring in the AOL vine yards. Teragram, prior to its acquisition by  SAS, was also a vendor. Two vendors are enough for Yahoo to rationalize. Heck, Yahoo is relying on Fast Search technology for its service last I heard. The Teragram technology might be a stretch, but the Yahoo technical team will be up to the challenge. The notion of becoming part of Microsoft will put a fire in the engineers’ bellies.
  2. AOL has its portal services. Granted these overlap with Yahoo’s. There’s the issue of AOL mail, AOL messenger, and AOL’s ad deals with various third parties. Google may still have a claw in the AOL operation as well. I haven’t followed Google’s tie up with AOL since word came to me that Google thought it made a bad decision when it pumped a billion into the company.
  3. AOL has a cracker jack customer service operation. Yahoo has a pretty interesting customer service operation as well. I am not sure how one might merge the two units and bring both of them under the Yahoo natural language search system that doesn’t seem to know how to provide guidance to me when I want to cancel one of my very few Yahoo for fee services. Give this a try on your own and let me know how you navigate the system.

I am delighted that I don’t have to figure out how to mesh Yahoo and AOL and then integrate the Yahoo AOL entity with Microsoft. Overlapping services are trivial for these three firms’ engineers. No big deal. If the fix is to operate each much as they now are, I anticipate some cost control problems. Economies of scale are tough to achieve operating three separate systems and their overlapping features.

I think that when I read the stories in my newsreader on Monday, September 29, 2008, I will know more about this rumor. I am still struggling with how disparate systems and the number of search systems can be made to work better, faster, and cheaper. Maybe the owner of the Yahoo AOL property will outsource search to Google. Google is relatively homogeneous, and it works pretty well for quite a few Web users, Web advertisers, and Web watchers. Watch this Web log for clarification of this rumor. For now, the word that comes to mind is a Vista “wow”.

Stephen Arnold, September 26, 2008


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