Putting Microsoft and Yahoo together: Some pieces won't fit
With Microsoft’s surprise $45 billion bid for Yahoo, a lot of people are talking about why the deal makes sense. The combined advertising networks and Internet plumbing, for example, would do a lot to help MicroHoo challenge Google (GOOG).
And those reasons might be enough reason to do the deal. In Microsoft (MSFT) CEO Steve Ballmer’s letter to Yahoo’s (YHOO) board, he emphasized how size would benefit a combined company. “While online advertising growth continues, there are significant benefits of scale in advertising platform economics, in capital costs for search index build-out, and in research and development, making this a time of industry consolidation and convergence,” Ballmer said. “Together, Microsoft and Yahoo can offer a credible alternative for consumers, advertisers, and publishers.”
But there are lots of other pieces in the two companies’ offerings that don’t fit well at all. And some of those could cause major indigestion as Microsoft tries to get a deal done. Among the trouble spots:
BRANDS
Yahoo has always been a bigger online brand than MSN, so it stands to reason that MSN would just go away. Yahoo Mail, Finance, Shopping and Games all outperform their Microsoft counterparts, and on the surface it makes sense to just back the winner.
But there are lots of problems with that scenario. Most obviously: MSN and Yahoo have been battling it out for a while, and both have tens of millions of monthly users. MSN loyalists have clearly decided that they prefer MSN over Google — so if Microsoft were to ditch MSN altogether, it would risk alienating a sizable chunk of its lucrative audience and losing millions in potential ad revenue.
JOB LISTINGS
Yahoo has HotJobs, Microsoft has a stake in rival CareerBuilder. Though on the surface it might seem logical to stick with HotJobs, which had 7.4 million visitors in December, and send CareerBuilder out to pasture, there are some politics to consider.
The big issue: Microsoft’s CareerBuilder partners are major newspaper publishers Gannet (GCI), McClatchy (MNI) and Tribune, the owners of big newspapers like USA Today, the Miami Herald and the Los Angeles Times. Through their network of newspapers and websites, CareerBuilder is actually bigger than HotJobs. While newspaper companies might not have a lot of financial might these days, they control a whole lot of well-trafficked websites — the kind of online real estate that Microsoft/Yahoo is eager to sell ads into. The company will have to find a way to settle things between HotJobs and CareerBuilder without alienating important advertising partners.
MAPS AND LOCAL
Maps and location-based services are becoming evermore important as the Internet gains traction on cell phones and GPS-type services gain popularity. Just look at the effect Apple’s (AAPL) iPhone had on Google: the search giant said traffic to its maps nearly doubled the month the gadget came out.
So it’s going to be a problem that Yahoo and Microsoft have totally different strategies for maps.
Microsoft’s Live Search maps are based on longtime Microsoft technologies, and at times won’t work with browsers such as Apple’s Safari — the browser in the iPhone. Yahoo’s maps are based on Javascript, which has fewer compatibility issues. Yahoo has tried to get web developers to embrace its maps by embracing more open standards.
On this one, Microsoft wouldn’t be able to keep both Yahoo Maps and Live Search Maps and have it both ways. Mobile carriers and other partners will want one clear direction for maps — and if the past is any guide, that means Yahoo’s open maps would go away.
I would appreciate a more in depth look at the compatibility issues of this merger. I have my website hosted on Yahoo and subscribed to other services and I think this merger would be a disaster for Yahoo customers.
I think this is a logical step for Microsoft. I also think that they both have what each other needs as far as resources, Microsoft has money and competative management, and yahoo has the traffic and engineer class necessary for the future of either company.
Microsoft does suffer from not being liked no matter what, but they are also very good at what they do. Yes like paying off thier competitors debts so that they have competition in the future.
When it comes to search, I like Google, but for most of the other services, such as Real Estate, Finance, personal…..I like Yahoo.
MSFT has better map and direction than yahoo and even Google (check the Bird's eye on Maps).
I believe this merger will increase the competition between MSFT and Google and that will lead to better service and products to the user like us.
I can just imagine the rush of engineers LEAVING Yahoo if Microsoft were to purchase the company. I know as a user I will immediately stop using the few things I still use Yahoo for and move over to Google for them, too.
This will be another example where Microsoft uses its size to eliminate a better rival. Remember Novell, Lotus 1-2-3 and WordPerfect, among others? They all had better products at the time Microsoft got into their business and ran them out of business with their size advantage.
MSN just seems so old school…For example, my grandma uses Hotmail. MSN Search?!?!? Get outta here!
It seems as though the younger generations have generally been drawn to Yahoo! for ease of use and simple functionality, while being cool and hip…everyone was doing it.
Google is still my favorite on the email front, which is probably the second most popular use after the Search Engine. Google hits that middle age range of users, where functionality and smarts are important and looks not as important…that's our generation Jon.
It may be true that there are areas of Microsoft and Yahoo's business that overlap. I'm certain that all of those elements have been considered and re-considered over the past year. I believe the real reason for Microsofts move is because Google has been in their "kitchen" for a several years drawing away key talent from Microsoft, and for that matter possibly Yahoo's also. Microsoft has a war chest like no other (almost). It seems that Gates and Company have been saving for a rainy day. Google is pulling ahead in so many key areas beyond search. Both companies have no choice but to "shoe horn" this one together.
You lay it out pretty well; Yahoo has MUCH smarter software engineers but you just know MSFT will want to change everything to MSFT technologies, and that will hurt the user in terms of bugginess, performance, and usability.
If you look at the numbers, it will be a surprise if Microsoft doesn't eventually succeed with this bid. Everyone was skeptical when News Corp. bid for the Wall Street Journal, but that eventually succeeded too. News Corp's offer was just too rich to turn down. However, one thing that analysts and pundits may want to consider is that the era is past where large portals (without successful and vibrant Premium quality, niche networks) can fulfill all an advertiser's needs – fragmentation works against them.
We think that advertisers will increasingly shift their digital advertising budgets into micro-targeting audiences using a variety of niche, premium vertical ad networks. The vertical ad network of premium, targeted publishers will complement broad reach achieved through portals and all types of remnant/performance ad networks.