Jason Calcanis on Yahoo-Microsoft Deal: Epic Mistake

 |  Includes: MSFT, YHOO
by: The Deal Economy

Calacanis, Jason_125x100.gif"Yahoo committed seppuku today," blogs serial entrepreneur Jason Calacanis about Yahoo Inc.'s (NASDAQ:YHOO) 10-year deal with Microsoft Corp. (NASDAQ:MSFT), referring to the Japanese form of ritual suicide by disembowelment.

Continues Calacanis:

The once proud warrior of the internet space laid down its sword, knelt at the feet of Microsoft and gutted itself today. There was no honor in this death, it was one brought by the shame of losing to Google and a lack of faith in one's ability to compete in the space they created. To be clear, Yahoo didn't need to do this deal, Microsoft did. Ultimately Yahoo will look back at this moment as the second -- and perhaps fatal -- mistake in their epic history.

Calacanis disdains quitters, as he made clear in The Deal's video conversation with him last month, when he called Wikipedia co-founder Jimmy Wales a "poser" for giving up too quickly on what Wales had touted as a "Google killer."

When his media company Silicon Alley Reporter crumbled in 2001 along with the New York dot-coms it chronicled, Calacanis says he watched other founders go on yoga retreats but kept his nose to the grindstone. His efforts paid off in 2005 when he sold his pioneering blog network Weblogs Inc. to AOL LLC for $25 million.

Aggression and innovation are the best weapons for competing against Microsoft, says Calacanis:

Nintendo didn't give up when Microsoft came into the video game space -- they innovated. Now the Wii outsells the mighty XBox 50 million to 30 million. That is how you fight Microsoft: you innovate. Steve Jobs knows this, Nintendo knows this, and Oracle knows this. Yahoo, apparently, did not get the 40-year-old memo.

With his current endeavor, Mahalo.com, which makes a human-powered search engine, Calacanis has the opportunity to play out his theory as he competes with the combined forces of Microsoft and Yahoo in search, which he calls "the most important business of the 21st century."

That's the silver lining for startups in all of this. As Google (NASDAQ:GOOG) and Microsoft lock into a dogfight for revenue and market share, leaving the Yahoo carcass on the side of the road, the bevy of crafty startups will get their chance to take the third, fourth and fifth positions in this very important race. - Mary Kathleen Flynn