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 Google.com 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 www.yahoo.com and typing www.newsearchengine.com 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 Yaho, that is the end of Yahoo and probably MS … so I suppose if you hate MS, here’s your chance to root for the arnivorous 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 🙂 ).