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Topic: Browser

Again, why does Microsoft want Yahoo?

Summary: But after pondering this past weekend's latest back-and-forth in the never-ending MicroHoo saga, I kept coming back to the original question about this whole transaction. Why does Microsoft really want Yahoo?

Mary Jo Foley

By for All About Microsoft |

I've tried to keep my postings about MicroHoo to a minimum, as it's hard to separate the posturing from the reality.

But after pondering this past weekend's latest back-and-forth -- where Microsoft offered yet again to buy Yahoo's search business and Yahoo tried to convince the Redmondians to come back and make another offer for the whole company instead -- I kept coming back to the original question about this whole transaction. Why does Microsoft really want Yahoo? (Or, more accurately at this point, Yahoo's search business, since Microsoft's days of wanting all of Yahoo thankfully seem to be over.)

Update: Speaking of back-and-forth, here's Microsoft's take on what happened with Yahoo and investor Carl Icahn, which (not surprisingly) is quite different from Yahoo's -- not to mention Icahn's.

One reason, in spite of CEO Steve Ballmer's claim that Microsoft's Live Search effort is going great guns on its own, obviously is Microsoft can't grow its consumer search share beyond 10 percent or so. But why else does Microsoft want/need Yahoo?

Ballmer & Co. are no longer claiming they want Yahoo's brain trust (which is good, since more and more of Yahoo's top talent had been laid off, has fled or is in the process of fleeing). Nor is Microsoft citing any longer the back-end infrastructure synergies that it would achieve by combining forces with Yahoo. Instead, as Ballmer stated it plainly at last week's Worldwide Partner Conference, it's really all about the ads:

"The more customers you have, the better, actually, the set of advertisers you have, the better advertisers  and people actually like the ads in search. There are a lot of places people don't like ads, but in search ads actually help the experience. So if you put together our volume and Yahoo's volume the thought was that should be a good thing."

What's your take? Does Microsoft really want to buy Yahoo's search business? Or are the repeated offers from Microsoft simply Microsoft's hard-ball way of seeking revenge -- and ultimately scooping up a Yang-free Yahoo at a firesale price?

Topics: Browser, Microsoft, Social Enterprise

About

Mary Jo has covered the tech industry for more than 25 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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47 comments
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  • Again, why does Microsoft want Yahoo?

    You should be asking why not? Both companies will gain a lot from this buy out. Yahoo has the services, Microsoft has the brand recognition. They can take the best of both worlds and have a dominant online services platform. It's pretty simple.
    Loverock Davidson
    Reply Vote

    • why not?

      Well, the problem is Microsoft has the services, too. If you look at the overlap between MS and Yahoo services it is pretty huge.... MJ
      Mary Jo Foley
      Reply Vote

      • Exactly

        So now the question is why can't MS get users to use its version of the same services now. If they don't address that and their goal is to gain the Yahoo users then they're making a mistake. Its quite possible that all they will do is drive that share to Google and solidify their position even more. On top of that using the Yahoo services as is makes a big case for NOT using MS technology. They would almost certainly have to move those services onto their platform.

        I think MS is making a mistake and Ichan, who probably knows nothing about the technology or user standpoint, is just worried about the one time shareholder benefit. The net result will just be one less player in the market...and possibly room for a new one to rise.
        storm14k
        Reply Vote

    • Dominant in what way?

      I assume for once you are being serious in your posting. What will be dominant? A lot of email customers, but how do you make money from that. If my email provider started spamming me with email, they wouldn't last long.

      Seriously, isn't there better options to get a web presence?

      TripleII
      TripleII-21189418044173169409978279405827
      Reply Vote

    • It's because they can't do anything useful themselves

      and they have a huge cash pile from market manipulation, so they want to buy their way to continuation rather than hit the floor REALLY hard due to lack of usefulness, just like the housing market.

      Shame their little scam is finally over. Next thing you know, the world will show signs of progression and everything ...

      Gosh, even the banks have no clue ;-)
      fr0thy2
      Reply Vote

    • dominant

      Dominant isn't always the best for the consumer. It leaves us further corralled. This is proven already by MS business practices over the years. Just one more tech they can take into the corner and thwart, manipulate, or ratard.
      sir4taye@...
      Reply Vote

  • RE: Again, why does Microsoft want Yahoo?

    I don't think that Microsoft is really interested by Yahoo search engine as this seems pretty inefficient compared to Google.
    Moreover i doubt that the Yahoo and the Microsoft teams put together would do significantly better than Yahoo team alone.
    And last but not the least, the fusion of these two could have the same effects on their market share as the fusion of Ericsson/Sony in the mobile phone market had on their respective market share.
    I think that Microsoft is interested by the patents Yahoo got when they purchased Overture a few years ago.
    timiteh
    Reply Vote

  • RE: Again, why does Microsoft want Yahoo?

    Well, since MS wants the SEARCH business more than any other parts I think they want the Overture patents. I think Google even pays for access to those.

    -Les
    Bordone
    Reply Vote

    • What good does it do?

      You can be sure that Google entered into an agreement that can't be canceled. So MS would basically get a bit of Google stock. Do you know of a different angle?

      TripleII
      TripleII-21189418044173169409978279405827
      Reply Vote

  • Well, it DOES keep the #2 search provider dazed and distracted. Yang can

    not operate and execute while this is going on. But, it is possible that MS views this as the last best chance to get a critical mass of the market that they can maintain against Google. Right now, they are in danger of completely falling off of the radar screen.
    DonnieBoy
    Reply Vote

    • Yang is out of his league

      and this whole escapade has proven little else. This company doesn't belong to him anymore, once you're a public company your duty is to the share holders. If Yang knew what he was doing he wouldn't have come back begging with his tail between his legs for $33/share last week. He might have made a decent CTO but he's no top executive.
      marks055@...
      Reply Vote

    • The thing is...

      If people are not using Microsoft's search, under it's various names and guises, right now BECAUSE it's Microsoft then just what does this do for them?

      It certainly does nothing at all for Yahoo, patents of dubious value notwithstanding.

      Both Yahoo and Microsoft were shrinking in their share of the search market before all this started and I doubt this awkward dance has done either of them any good.

      IF this is an old style Microsoft play to get a position in search then I'm willing to bet it isn't going to work.

      (Old style in the sense of that's how Microsoft has entered many markets including OS is to buy up a small player and "innovate" on top of the new property.)

      You don't think that after all this very public to and fro MS will actually catch Google unawares do you?

      I'm also very interested in what MS will end up with given the deal Yahoo just made about ad sharing with Google and how much that might cost MS to get out of if they're successful.

      Assuming, of course, there's much of Yahoo left should they actually be successful.

      ttfn

      John
      TtfnJohn
      Reply Vote

      • I "MS Live Search Yahooed" for information just doesn't have the ring to it

        :-)
        fr0thy2
        Reply Vote

  • RE: Again, why does Microsoft want Yahoo?

    Seems odd. On our own web sites search referrals, Yahoo is always a distant 3rd behind Google (60%) and MS Live (30%). Maybe MS wants the portal, or e-mail accounts, or maybe just want to eliminate a competitor.
    donelder@...
    Reply Vote

  • What was Microsoft's last major purchase?

    I haven't been keeping up; when was the last time it flexed it muscles? Maybe they really only want it to intimidate Google: you encroach our apps territory, we encroach your search turf. What else could it possibly be?

    I think Ballmer is simply on an ego trip: how dare you say "no" to Microsoft? Do you know who we are? Do you know how powerful we are?
    davidr69
    Reply Vote

    • - I concurr -

      WE are NOT BORG ... we will NOT be assimilated ...

      although M$ wants everything to be assimilated and boxed with their logo - to hell with any competition ; destroy those that rebel, and absorb everything else!
      digitrog
      Reply Vote

    • Exactly

      It's all about SteveB's infinite and ever-expanding (not a
      contradiction in MS World 3.1). If he were a competent
      CEO, I could forgive him all the BS he's been spewing the
      past few years. But here's a useful thought experiment.
      Since the day Steve became CEO of Microsoft (Thursday 13
      January 2000), what has the stock done? How much would
      US$1000 invested on that day be worth now? How much if
      that $1000 had been invested in AAPL, GOOG or YHOO?

      Let's see....
      13 Jan 2000
      ...MSFT closed at $107.81 per Yahoo! Finance, so $1,000
      would buy 9 shares with $29.71 left over. Last trade on
      Monday was $25.15 per share, so that $970.29 is now
      worth all of $226.35 - less than <i>a quarter</i> of the
      original value. Way to go, Steve!

      How about we put that $1000 into AAPL?
      13 Jan 1000
      ...AAPL closed at $96.75, so our $1,000 buys 10 shares
      with $32.50 left for dinner. AAPL did a 2-for-1 split on 21
      June 2000, so we now have 20 hypothetical shares. At the
      close on Monday, 20 shares were worth $3.477.60 -
      almost 3.5 TIMES our initial investment. Way to go, Steve!

      We could continue this, but why? MSFT has
      underperformed AAPL, GOOG, the Dow, the NASDAQ, the
      S&P...if you're still holding shares in Enron or IndyMac,
      you're underperforming MSFT, but the rest of you can pat
      yourselves on the back.

      And if a CEO doesn't improve the value of the company, or
      at least the market share, what good is he? It's time for
      MSFT to grow up and get an adult CEO. Now. Please?
      Pretty please?
      Jeff Dickey
      Reply Vote

  • RE: Again, why does Microsoft want Yahoo?

    "Because it is there."
    --George Mallory, asked in 1923 why he climbed Mt. Everest, where he eventually perished
    jhoffman@...
    Reply Vote

  • RE: Again, why does Microsoft want Yahoo?

    Doesn't anyone think of Tony Montana in Scarface 'The World is yours' when it comes to Microsoft? Everything is not enough for Microsoft.
    victorfrazee@...
    Reply Vote

  • RE: Again, why does Microsoft want Yahoo?

    At M$ it's no longer about Developers, Developers, Developers, Developers; it's about Advertisers, Advertisers, Advertisers, Advertisers.

    They desperately need the online ad revenue.
    bricar2
    Reply Vote
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