Darren Waters

Walking away...

  • Darren Waters
  • 4 May 08, 08:11 GMT

How mistaken was I?

I thought too much was at stake for Steve Ballmer, for Microsoft to walk away from Yahoo.

But he was speaking the truth to staff when he said on Thursday he wasn't afraid to ditch his pursuit of Yahoo.

So what does this mean?

For Microsoft it means it has to "go it alone" in the web landscape. It has to find a way to compete with Google - on search, on services, on advertising.

No-one doubts that Microsoft has the engineering talent to match any firm in the world - but can it be nimble enough? Can it turn good ideas into compelling products?

The $44bn it would have spent on Yahoo is now available to plough into products and ideas. With initiatives like Live Mesh on the horizon the company is beginning a process of trying to make itself relevant to 21st Century web users.

But this is Microsoft's last chance. It failed once to adapt to the web age. It cannot afford to fail again.

080506_yahoo211.jpgFor Yahoo this brings relief all round. In the last few weeks Yahoo had done everything in its power to make the firm as unattractive to MS as it possibly could - including hopping into bed with Google to trial its rival's ad search technology.

Yahoo boss Jerry Yang, in a letter to staff today, talks of the firm's "important transition". He knows that Yahoo has to make itself relevant to users once again.

Somewhere in the last few years Yahoo went from being the most important firm on the web to an also ran.

The company has already begun a process of "re-wiring" itself - bringing together all of its services into one coherent whole.

I also think it would have been a painful process to integrate Yahoo, its staff and mindset, into Microsoft.

Yahoo is a much more open company than Microsoft; open in the sense of standards.

Mark Shuttleworth, the Ubuntu promoter, told me a few weeks ago that a combined MS/Yahoo would have been "healthy" for Microsoft.

"Talking to Microsoft employees I get the sense they realise they can't transform that company into a Windows-based company without killing it," he told me.

That change won't now happen. So perhaps Microsoft has missed an opportunity here to re-invent itself.

For Google it means jubilation: delight that they are now facing two firms with a smaller web footprint rather than a genuine single competitor.

The Mountain View company, I'm sure, will also say it is pleased that a firm with a poor track record with regards openness has not swallowed a major competitor.

No-one can ever say the world of the web is dull.


  • Comment number 1.

    Relief. Microsoft grabbed huge market share for Internet Explorer by simply offering it as the default Windows browser. That's what killed Netscape. We know this.

    If MS bought Yahoo they would probably make it the default search page in IE instead of MSN, then build Yahoo based links into loads of applications (i.e. offering Yahoo Mapping of a contact's location by default in Outlook). They would steadily push users into visiting Yahoo "by accident" and then claim users were choosing it over Google.

    This method of controlling default setting through the operating system gets around anti-competition laws, and works because so few users bother to change defaults or install alternative software when there's something usable in the OS.

  • Comment number 2.

    I think it is a shame but for a rather perverse reason! The idea of Microsoft effectively throwing away tens of billions of dollars comforted me as it could only expedite their eventual demise. I live, work and breath IT and it is becoming crystal clear the future is based on the Google model not the Microsoft one. When I look at my all my gadgets and gizmo's I see the common link being the internet not the PC. Microsoft have never done the internet well, they don't understand the idea of providing the commodity for free and making the money on the service. If they had purchased Yahoo, they would have tried to tie people in to their software and their protocols making the whole thing very inflexible, just look at IE with its ActiveX, MSN instant messenger, Media Player, Office... ? That is the Microsoft way and it seems a very outdated way of doing business in the 21st Century. My Asus eee does not run Windows, nor does my phone nor my media centre nor my games console. In fact everything I now use to connect the the internet on a regular basis would not benefit at all from Microsoft software in any way, shape or form! My Apple runs OSX, My PC runs Kubuntu, as does my wife's, my son's and even my ten year old daughter's! And like everyone else I know, our home pages are all set to! For me, anything Microsoft is just something extra to uninstall.

  • Comment number 3.

    Fantastic news! Put a smile on my face on this Sunday morning, at least now I can go and renew my flickr account and not delete it!

  • Comment number 4.

    I have mixed feelings about this whole thing, at one time i think they should merge and when i saw them as one company, the possible problems can come make me thing they should not.

    And i think they have make a good decision, in this way they will not rely on any other company and they will stand on their own foots as adult in this new web environment.

    Best wishes for both companies.

  • Comment number 5.

    I'm not sure sure it is good news in the long term.

    Google is streaking ahead and I thought that the two major competitors joining together might actually make the playing field more level.

    Currently Google can make or break companies with their market share of search. People just assume Google's "don't be evil" motto will protect them - I don't want to put all my eggs in one basket.

  • Comment number 6.

    super_tux, u are right but we should not take google as easy, it going to become BIGGER EVIL than MS as it got monopoly on internet.

    Today i am using Google apps for my company what if tomorrow they charge me for that? since all the companies around will be shut down, i will got no option but to pay them, so we should not take Google easy, it is same evil as MS.

  • Comment number 7.

    Eric Schmidt (Google CEO) said in a recent interview he wants all users to have a choice in the market when it comes to using their products and services. As they can afford to give their products away for free, where other companies would have to charge, there's not much consumer choice...or is there?

    Why did the acquisition not go through?
    Yahoo! knows their user base and massive audience is their major strength; clearly Yahoo! believes this is strong enough to see them return as a force without Microsoft support.

    Here's my take on the trends of how each company has grown their markets.

    Google way:

    1) Enter market through acquisition or (rarely) in house technology

    2) Marginalise competitors in space by offering products for free

    3) Heavy losses in new market supported by only profit generating product - AdWords.

    4) Build market share while developing product

    5) Begin charging for product

    6) Generate revenue and profit

    Microsoft way:

    1) Enter market through acquisition or in house technology

    2) Muscle out competitors in space through economies of scale

    3) Heavy losses in new market supported by core profit generating products

    4) Build market share while developing product

    5) Generate revenue and profit

    Microhoo! Way

    1) Enter market through acquisition or in house technology

    2) Introduce product to user base, grow and retain market share through massive collective user base and audience

    3) Heavy losses supported by core profit generating products

    4) Build market share while developing product

    5) Generate revenue and profit

    What made Microsoft so unpopular (amongst others), and will make Google so unpopular, is their second step in growing new markets and products - marginalising existing businesses is another way of bullying your competitors.

    Where Google leverage off the profit and revenue generated by AdWords to launch new products, Microsoft would have been able to leverage off the combined massive MS\Yahoo user base.

    Sure, the consumer wins in the short term as we all save money...while it's free, but don't forget Google is a publically traded company and is openly going down the Software as A Service [SAS] route.

    Google WILL start charging for SAS eventually, by then it will be too late for consumer choice...

  • Comment number 8.

    I expecting this, Microsoft and Yahoo would never have work, their employees hate each other to much.

    I also think that Microsoft choose the wrong time to try and buy yahoo as they have several projects underway which may increase revenue and increase how much Yahoo is worth. From few interviews I have read from Yahoo shareholders they was not exactly happy with Microsoft offer neither, which explains why Microsoft did not take the hostile take over route through they apparently had alternative directors lined and ready to go in.

    I think their lots of people celebrating here, Microsoft and yahoo employees. Microsoft shareholders, yahoo board of directors who hates Microsoft with passion. And the majority of Yahoo customers.

    Google will not be so happy as Microsoft will now be going after the web 2.0/3.0 start ups Google will want to buy but now Microsoft will have more cash in the bank to out bid them. And if Microsoft did buy the Yahoo, Google knew it could fly in and take the best of the best of Yahoo Engineers, who would be running towards the back exits as Baller come through the front door and leave Microsoft with years of work to actually connect all their services up and make them all run together, especially with Microsoft non slandered software, formats. While Google could of just bought smaller more dynamic companies and continue their market expansion.

    Now through Google will have to fight a single minded Microsoft who sole aim is to destroy Google and take over the web.

    And of cause baller will not be n happy because Microsoft for once been force into full retreat by a tech company and this could inspire other companies to refuse Microsoft money, which make buying other companies more difficult.

    Guest it all balances out in end, now I like forward to a good old three way fight between these three juggernaut's of the internet, well until some young up start comes out of know where in knocking all three out for the count.

  • Comment number 9.

    The day MYHOO!! went down.......

    There is melancholy in the wind at the Microsoft camp. Yes it wanted to add Yahoo!! to its repertoire but hey Mr. Yang ain't gonna go without a fight!...
    but how resilient Microsoft is, time will unfold!!

    " Every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest Lion or it will be killed.
    Every morning a Lion wakes up, it knows it must outrun the slowest gazelle or it will starve to death. It doesn't matter whether you are a Lion or a Gazelle.
    When the SUN comes up,
    You better start running..."

    In todays competitive netvironment one has to be on there toes...otherwise Microsoft is always hungry.

    Whew!! The day when after years of dominance they almost faced a formidable challenger - MYHOO!! .

    The rest of the World!!
    For the netvironment to prosper healthy competition is paramount.
    The joint adventure between Yahoo!! and Microsoft would have been disruptive but could have brought about balance to this one sided battle. The most difficult task for this merger would have been to work as a cohesive organization - their cultures being miles apart. For the consumer it would have meant a better Web 3.0 but
    'Ka Kari' - what to do?.

    For now Yahoo!! is away from Microsoft's ambit but,
    On the horizon looms a threat -
    the Goofgles !!


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