A successful bid for Yahoo! would be death knell for Microsoft

Microsoft has weathered two significant challenges to its world wide monopoly. It is facing the third challenge right now and it is not advertising revenue. The first challenge was the Internet. Microsoft almost missed the boat there but thanks to Bill Gate's mom he was introduced to a local ISP and immediately grasped that the Internet changed everything. He wrote a famous memo and turned the MSFT juggernaut. It is still too bad that he crushed Netscape in process, that was uncalled for. But, by introducing a TCP/IP stack into Windows 95 Microsoft ensured the rapid growth of the Internet and their own place as the platform of choice for accessing the marvels of the web.

The next challange to Microsoft was security. And, another memo outlined their response and what has now proven to be a successful strategy. Microsoft has weathered the vulnerability storm. Thanks for to better patch management than to better software practices, but that is coming too.

I find it ironic that Bill Gates has even identified the next major challenge to Microsoft's world domination. He recognized back in 2005 that web based applications were the next "sea change". But, because he had stepped down from day to day operations, and this year is retiring completely, I believe Microsoft has failed to act effectively to address this final challenge.

Maybe it is my years fighting "ad supported software" otherwise know as adware, scumware, shlockware, spyware, that makes me suspect of the "ad economy". Yes, Google makes obscene levels of money over a few simple but powerful applications. But just because there is money to be made does Microsoft have to be in that space? Was MSFT buying up gold and oil reserves the last few years? Are they getting into bulk shipping? Were they buying New Zealand dollars? There are tons of ways to make money if you are sitting on $19 billion. Ways that have real returns for your stake holders.

This grab for Yahoo! will kill Microsoft if it goes through. The guys at Yahoo! are smarter at generating ad revenue than the guys at MSFT but they are still losing out to Google. Microsoft should open their eyes to the real challenge facing them: software as a service. Chasing after ad dollars is a red herring.

If this deal goes through you will be able to mark this single event as the beginning of the end of the biggest tech giant ever.