The end of Microhoo

The end of Microhoo

Summary: ...which really isn't an apt title, as something has to begin for it to end.

TOPICS: Microsoft, Google

...which really isn't an apt title, as something has to begin for it to end. However, it certainly looks like a merger between Yahoo and Microsoft is unlikely to materialize. This is sure to disappoint Icahn, whose interest in the deal I always viewed with skepticism. He's good at making money, but the interests of short-term profit from sale of stock aren't always in line with long-term growth.

My big issue with the proposed merger was that I couldn't figure out how Microsoft was supposed to take a sinking search-related software giant, add it to their own small search share, and result in something that would make $43 billion seem like a good way to spend Microsoft's money. Like I've said before, I understand why Microsoft would want to boost market share for its ad platform (the real motivation for the Yahoo deal), as ad platforms are likely to be more important in an Internet world where many services are offered to customers for free, monetized by ads.

My concerns were both practical - would a merger with Yahoo really boost Microsoft's search share enough to pose credible competition to Google - and cultural - would it be possible to merge Yahoo's 16,000 employees into Microsoft. On the latter point, I think it would have served as a huge distraction from the real work necessary to counter Google's advertising heft, which currently emphasizes too much the need to pose a frontal assault on Google's dominance in Internet search.

I think a better way to counter Google is to use what I'll call in this blog the "Hannibal" maneuver. No, I'm not speaking of THAT Hannibal, though a solution which involved the entire Microsoft Silicon Valley campus walking over to Google headquarters and eating everyone they find there would certainly be twisted (Google does feed its employees well in its free five-star cafeterias, so I'm not saying they wouldn't be tasty). Rather, I am speaking of Hannibal the famous Carthaginian general, who beat the more numerous Romans at Cannae, not by mounting a frontal assault, but by flanking in such a way that they could attack from the unprotected sides.

That has been the recipe for Apple's surge in desktop computers. Granted, it helps that Jobs whipped the desktop division into competitive shape, pushing to replace the aging Mac OS core with plumbing carried over from his NEXT OS days while reinvigorating the design skills that had made Apple products so popular in the first place. From candy-colored iMacs through iPhone v2.0, Jobs return to the helm of the company he founded is a testament to the power of good ideas backed by powerful ideologues (a power which Jobs, as a founder, naturally has).

However, the real boost to Apple on the desktop was their success in music players. That isn't to diminish the number of things Apple did right along the way (great store concept, positioning themselves as "fashionable" Information Technology), which to my mind constitute the individual ingredients in the recipe, but the halo effect is very real.  A popular "side" business, in other words, was what it took to make people look past small market share in the core desktop computer space.

Google all but owns Internet search these days, and though Microsoft certainly has the resources to mount a frontal assault against them (and I'm not saying Microsoft shouldn't figure out search), that's a lot harder to do than growing a segment in which Google might not be quite as strong, and plugging your own ad platform into it.

It clearly wasn't Google's original plan to "challenge" Microsoft. However, by growing their share of a market to which Microsoft paid no attention (a "side" business, as it were), they ballooned to a size where they could actively challenge Microsoft in a number of areas, using their dominance in search - and the Interent advertising advantage it gave them - as an island of safety from which to launch new initiatives that, along the way, challenged Microsoft.

I can think of LOTS of areas that Microsoft could successfully grow as a means to give its ad platforms leverage. Search is merely one way to target ads, albeit a particularly important one for the Internet. There are LOTS of ways to target ads, though, and Microsoft has businesses in most of them.

The strategic response is, in other words, all about the software...because that is the kind of company Microsoft is.

Microsoft, in trying to counter Google search dominance, is fighting the battle under the hardest possible terms when they go head to head in search (though, again, it's still worth doing, if nothing else but for the lessons learned). Far easier would be to surge in areas where Google is weakest. Given the breadth of Microsoft product catalog, opportunities would seem abundant.

The issue, of course, is whether Microsoft can grow those divisions strong enough to become serious ad-based counterbalances in their own right. Whether or not Microsoft can do that, however, is all about the software. If they make the right kinds of software, it can happen.

Apple came from essentially nowhere to define the digital music playback space, and Google did the same in Search. Microsoft can do the same, provided they have their innovation house in order.

This is where Microsoft should be concentrating their energies, not distracting themselves with debt and the need to absorb 16,000 new employees.

Just my opinion, of course, and not one that I will work hard to impress on anyone important, as the deal seems to have collapsed on its own.

Topics: Microsoft, Google

John Carroll

About John Carroll

John Carroll has delivered his opinion on ZDNet since the last millennium. Since May 2008, he is no longer a Microsoft employee. He is currently working at a unified messaging-related startup.

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  • It's not over yet, but...

    ...but a Yahoo buyout doesn't seem terribly likely at this point. I won't say "it's over", though, until after the Yahoo shareholder meeting, since if Icahn wins, he'll certainly try to change MS' collective mind. I figure the chances of Icahn abandoning his proxy fight are zero.
    John L. Ries
  • Jerry's got a job at Google waiting

    for him if he's ousted or Microsoft eventually gets Yahoo. Either which way it helps to thwart Microsoft.
    Ralph Malph
    • Jerry Yang is a billionaire

      I somehow doubt the prospect of a job at Google factors much into his calculations.
      John Carroll
  • Motivations

    If the war agenda gets put on hold, Microsoft can
    concentrate on meeting human needs. The shift in
    motivation away from "winning the battle" would be a
    healthy thing at this point. The Software can be vital to that
    purpose but it has to manifest itself properly.

    Apple is a loser. We hear it repeatedly. Negligible market
    share, closed and mercurial, they failed to exploit the
    network effect when it was vital. If the criteria for "victory"
    is the volume of customers, Apple is still vanquished. If
    however, the criteria for victory is the singular user
    experience, the results are more interesting. Now why
    wouldn't that start out multiply out eventually.

    What "war" in all of human experience has ever been
    productive? Open market competition will always value the
    contest over the victory. Unlike war, it has rules.

    The modern man has to acknowledge a "non-thing" as
    being central to a enlightened life. The empty space of
    democracy that allows for different ideologies and
    discourse. The empty arena called the marketplace that
    hosts competitors. Technologies will have to coexist. We
    have to cordon off a space for it. Its a mental leap to be
    committed to "nothing", but it will be required.
    Harry Bardal
    • Apple does wage war

      ...strategically, albeit. War in economics is very different than war on a battlefield. The company that best satisfies consumers "wins," and strategy plays as big a part in that as it does in traditional war.

      Apple has been VERY strategic. Don't let the marketing convince you that they are any less an avid competitor than a Microsoft or an Oracle or a Sony.

      Competion implies conflict, and Apple aims to win.
      John Carroll
      • You made a funny

        "Strategy" comes from the Greek word "strategos", meaning "general" (as in officer), and was originally used only in a military context.

        War is thus always strategic; at least if you're fighting to win.
        John L. Ries
  • Microhoo, I LOVE IT!!!

    Microhoo, I LOVE IT!!!
    Maybe now that the tides have turned they may come up with something like GoogleHoo, or googleyhoo, or perhaps even better, GooHoo. Yeah, that's the ticket.
    Man that would be a real eye catcher wouldn't it?.
    Just think, you could now go GA-GA over GooHoo.
    Aaron A Baker
  • Increasing profits

    Eyes to ads

    From Yahoo!, Microsoft would gain both search share and content. Microsoft is currently weak in these areas despite significant investment.

    The software can be valuable as an efficient means to profit from the market, once there are buyers. Yahoo!'s open source investments would not be of lasting influence to Microsoft.

    So it's not about the software.

    Apple of Jobs' eye

    Even while the halo effect was increasing Mac sales, Apple went ahead with the decision to drop "Computer" from the company's name.

    Any product has a life span.

    What Steve Jobs has been able to do in computers, in mp3 [yes, I know] players, and now in telephones is to create a more expensive version of a product that people are willing to buy.

    If any one product fades, there will be others to maintain profitability.
    The computer business is likely to fade first because of the number of dollars difference between Apple's products and the price-declining standard products.
    (That observation does not concern product quality, only that most of the pc market is price-sensitive.)

    Where Microsoft is looking to search and content to obtain the viewers sought by customers, Apple uses design and panache. Microsoft is mass market, Apple expensive niche. This is not exactly a change in the way the two companies have always operated.
    Anton Philidor
    • So Microhoo isn't ended.

      The current Yahoo! management has become an immoveable impediment. While it lasts.

      But Microsoft still wants what Yahoo! has. And Yahoo! is still making insufficient profits, to those who decide what is a sufficient profit.

      I think the current resistance to Microsoft's offer has only lowered the eventual purchase price.
      Anton Philidor
  • Cannae? No.

    A double envelopment occurs when an opponent presses in at the center so far that the counter-attacker is able to charge in from the flanks, surrounding the opponent.

    This work because the surrounded opponent has fewer soldiers actively fighting than the attacker can bring to the front. Much/most of the surrounded army is useless.

    With Apple, on the contrary, you're discussing a tactic at which a success in - or at least pressure on - one part of the line improves the chances of a concerted push at another part of the line.

    The best defense to that sort of tactic I know was Robert E. Lee at Sharpsburg/Antietam, in which the vastly outnumbered Lee brilliantly pulled his soldiers from one part of the line to another all day to meet a series of attacks.

    What Antietam/Sharpsburg and Cannae have in common is the size of the losses. Cannae may have been the bloodiest one day battle in history, but Antietam doesn't trail by much and had the most casualties of any day in the Civil War/WBtS.

    I think a football analogy with blocking back and running back works better, myself.
    Anton Philidor