Microsoft and Yahoo

I’m still digesting all the Yahoo Microsoft commentary but it seems to shake out as tech folks thinking it will not work and investment folks loving the deal.    Hmmm – the comments seemed favorable, but Microsoft lost a huge chunk of value in stock trading so clearly the “market” is skeptical of this.

One of the things I’ve noted in Silicon Valley is how popular Google has become and how poorly regarded Yahoo and Microsoft have been with respect to internet stuff, though part of this may be that I’m involved with mostly search related online events and conferences and Google clearly rules that roost.   I think the Google success and mystique has probably kept tech folks from focusing on the huge potential of a combined MS / Yahoo empire.    Where both Google and Yahoo have succeeded in capturing online traffic Microsoft has conspicuously failed.   Yet Microsoft has continued to pull very expensive enterprise computing rabbits out of its hat, with even the most recent earnings reports suggesting they still are a dominant and profitable force in the software market.     What better way to smooth the transition from old to new than to buy Yahoo?      Pitfalls?   Sure, but the cultural differences will be happily overlooked by Yahoo employees hungry to see their stock pulled out of the sewer.      If Microsoft is smart they won’t merge the brands – rather inject life and some cash into the flailing Yahoo search and affiliate system.    Microsoft could strongarm online affiliate publishers in a way Yahoo could not – by essentially bribing them to move over from Google via 100% revenue sharing.    The extra total traffic and buzz would be well worth the sacrifice of some of the publishing money.     

As a Yahoo stock holder I’m obviously happy to see the offering price pull the stock up, and positive attention focused on this deal, but I also think it’s a good ideas for the reasons I’ve discussed over the past year.   Most notably MS internet failures, Yahoo’s internet successes in Web 2.0, and the huge combined traffic footprint of a combo-company.

Henry Blodget, who helped me in an oblique way with his rumor that pushed me to buy more Yahoo on Tuesday, now is reporting that there may be other parties interested in Yahoo.   This would make sense given the companies clear potential to be as successful as Google while it languishes at a Market capitalization of about 20% of Google.   I’ve never understood the huge pessimism about the company – clearly the “number two” online behemoth.     We’ve got dozens of major automakers, oil companies, etc.  Why is there an assumption that only Google can succeed online?

Disclosure:  I’ve got Yahoo, and finally don’t have to say that hanging my head in shame.

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