MattMaroon.com

Ever since Microsoft announced their intention to purchase Yahoo, Silicon Valley has had their collective panties in a bunch. First the question was "is this a good idea for Microsoft and/or Yahoo shareholders". I think the answer is yes and yes. Yahoo’s primary power now is as a brand and a domain name. They’ve got the number one email service, which Microsoft can seamlessly combine with theirs. Nobody who uses Yahoo Mail gives a damn what the software looks like (and even if they did, Hotmail is superior in almost every regard) they just saw a link on Yahoo.com that said "free email" and clicked it. So as long as their ilovethepackers1982@yahoo.com address doesn’t change, and it won’t, they’re perfectly happy. MSFT gets the customers and lays off the employees.

That’s how it’s going to be with search and dozens of other things. I’m sure some, like Flickr or Yahoo Games, will replace MSFTs sad competitors. Either way, there’s tons of synergy there. The only losers are Yahoo employees, but most of them were going to get laid off anyway as the company swirled down the shitter. At least now they’re going to get to cash out some stock/options and, if they’re lucky, maybe get to jump to a ship that has a much smaller hole in its hull.

The shareholders win because MSFT is paying more than any hedge fund would (they can due to the synergy) and the way Yahoo was going, it was due for either a takeover or a bankruptcy. So despite all the grumbling coming from their top execs, I’ll be surprised if they don’t sell to MSFT quickly. Were I them, I’d dispense with the usual playing hard to get routine and be done with it next week.

Question number two was "is this bad for startups?" I think it’s great for the most part. The reason startups can compete with and destroy corporations is their size. Making one far larger makes it far slower as well. True, Yahoo has been fairly acquisitive, which is a bonus for startups, and not just for founders who cash out, but for anyone raising money from investors, who like to have more exits available. But I’m not sure there will be fewer overall acquisitions now. The newer, bigger, slower Microsoft/Yahoo might look to buy more companies to compensate for their overwhelming lack of innovation.

I’m running a fantasy sports startup and Yahoo is the biggest competitor in our market. The acquisition hurts me in that MSN was the largest portal (maybe the only large portal) that doesn’t have their own site (they seem to have some deal with Fox Sports). So we lose our largest potential acquirer. At the same time, our largest competitor is going to go through a long state of upheaval, during which I don’t see fantasy sports being much of a priority. Hell, they haven’t changed much code in the last ten years as it is, and still have Java Applets all over the place . So I think that’s a huge net win for us. If we do well enough we don’t need extra potential acquirers, so I’d rather just see my competition hampered.

Then there’s the question of whether or not the acquisition is fair, as posed by Google. Seems kind of absurd really, given that even combined, they’re still losing in the search market by about a 2-1 margin, and that the gap is probably going to keep increasing. You can bring up past antitrust cases against Microsoft all you want, but this is not the same. True, MS will combine the top two webmail clients, but there’s absolutely nothing preventing anyone from switching to Gmail. It’s almost trivial to do so. Hotmail doesn’t come with any sort of default install on Windows, as did Internet explorer. It’s the same for virtually every other brand involved. Being the default search engine in IE hasn’t gotten MSN past the 10% mark yet, so any regulatory concerns are clearly unfounded.

As far as I can tell, Google seems to find it unfair that they’ll actually have a competitor. Waaaaaaaaaaaah. I must admit I was baffled when I heard that the combined entity would comprise 30% of the search market. Who the hell is searching on Yahoo or MSN these days? I’m sure there are still plenty of seniors who still don’t know what a URL is, and think you have to go to Yahoo.com and then type in Google to get there, but that can’t be a third of the population.

And finally, there are all of the complaints that Microsoft is going to destroy the few awesome properties Yahoo does have, such as Flickr and Delicious. Bullshit. All of those arguments are predicated on the idea that Microsoft isn’t very good at consumer-facing apps. That’s downright retarded. See the XBox360, which, in only its second generation, has taken the lead from entrenched competition. See the new suite of Windows Live programs (this blog post is being built in Live Writer, which, if you’re a blogger, I highly recommend checking out.) See the new Hotmail, which is vastly preferable to any of its competition. It’s faster, better looking, and more functional (it has folders) than Gmail.

Don’t get me wrong, Microsoft isn’t perfect. But I feel like they’re smart enough not to kill a good thing. I’d expect that instead of destroying Flickr, they’ll instead allow you to integrate it with Windows and drag and drop pictures to and from it as if it were a hard drive. I’d pay double what I’m already charged to use Flickr for that. They might change the name to Windows Live Flickr or something, but they’ll only make it better. They almost certainly won’t make it worse, and they’d be downright idiotic to cancel it.

It will be interesting to see how this plays out, but I just don’t see an independent Yahoo in the future. At least, not the Yahoo we see today. They made too many mistakes, and it’s too late to right the ship. The least their management could do at this point is allow their shareholders some dignity and take the offer that’s on the table.

This entry was posted on February 5, 2008 at 12:29 am and is filed under Me Thinking So You Don't Have To . You can follow any responses to this entry through the RSS 2.0 feed Both comments and pings are currently closed.