Where Microsoft and Yahoo! Can Beat Google

With the acquisition of Yahoo by Microsoft looking ever more likely, it’s time for the future combined entity (yes, that’s right - MicroHoo) to face reality. If the purpose of the merger is to beat Google at search, then it will fail. Google has won the search wars - get over it. Google is now the web’s default home page and every potential competitor needs to accept this and figure out how to co-exist.

Does this mean MicroHoo is doomed to failure? No - not if they focus their resources in the right areas. If MicroHoo lets Google own search, it opens up the rest of the web to compete in and dominate. Here are the three most important steps MicroHoo needs to take:

• Stop producing content. As CNET has learned, producing content is expensive and the margins are horrible. Google does not have writers, editors and producers on staff. Google seeks to organize the web’s content, not produce it. Both Microsoft and Yahoo have lots of people generating content and as long as resources are going into this area, MicroHoo’s margins will never get close to Google’s. Instead of producing the content internally, focus on becoming the platform on which users generate their own content. Both Microsoft and Yahoo have jumped on the user generated content bandwagon to a certain extent already, but to compete with Google they need to focus on this.

• Buy a social network. The notion that social networking is just a passing fad, or that social networking users will show no loyalty and jump from network to network, just isn’t true. The biggest social networks have large, growing user bases that MicroHoo needs to tap into. Social networking users spend huge amount of time everyday on their network of choice and MicroHoo must be part of it. So who to buy? Facebook is off the table and now Bebo is gone. But that leaves at least Hi5 and Piczo. While these are second tier networks in terms of users, the marketing might of Microsoft and Yahoo could easily propel either of them to the top three, right up there with Facebook and MySpace.

• Become the center of the blogging universe. At their core, blogs are mini-social networks. They attract engaged readers on a regular basis around thousands of topics. Yahoo recognized this with their purchase of MyBlogLog, but it needs to go further. Instead of playing around the edges, MicroHoo needs to own this space. Step 1: buy a blogging platform like Automattic (the company behind WordPress) or MovableType. Imagine all the services MicroHoo could offer to the hundreds of thousands of bloggers on either platform: ad revenues via the Yahoo Publisher’s Network, automatic MyBlogLog integration, integration with the social network they need to buy, preferential search services on Yahoo. Bundle all these services into the blogging platform itself and watch the usage (and revenue!) take off. Step 2: buy Technorati. Blog content is just not easy to find, especially for newbies. Buying Technorati starts MicroHoo along the path of becoming the central place where people go to find relevant and interesting blog content.

Microsoft and Yahoo have awe-inspiring resources. As long as they don’t try to take Google head-on in search, the new MicroHoo can continue to be a major player on the Internet and give Google a run for its money.

Comments

[James Cullen]

Really great ideas, except for buying a second-tier social networking site. Given how those work with subscriber feedback loops, etc., I think you need to adopt the GE mindset and either be #1 or #2, or not in the business.

[Sanibel]

I believe your opinion is correct. However, the reason Microsoft wishes to purchase Yahoo is to compete in search. Microsoft already has a search function. Adding Yahoo won't add much to its capability. Ballmer is spending money that could be distributed to shareholders whose stock has gone nowhere for quite some time.

[Tom B]

MicroHOO says more about the utter ineptness of MSFT's Board to restrain Ballmer than it does about any failings of Yahoo's Board. But then, MSFT's board let the bald one release Vista. And they let him keep the losing XBOX franchise....

[kdart]

Possibly... But you need to keep in mind that Google also has "awe inspiring resources". More, in fact. They are also better positioned to execute on exactly the same ideas. Don't think that Google can not also do those things.

I see MSFT attempts as tragic, and nothing good will come of it for anybody except Google.

[Opinion]

James, I don't think that you got this right.

Microsoft with unprecedented resources and several tries just could not become a player in the Internet search - even YHOO, which started from nothing beat them badly.

Social networks and blog sites proved that they are like music CDs or movies, just because you throw at them lots of money, you can't necessarily buy success. MSFT is just as lost as the old, dying recording industry. They are showing remarkable similarities.

MSFT's biggest problem is that they just can't ensure in this new world that their money will buy them what they want or need.

In fact, this entire new world is built on infrastructure that MSFT claimed to be worthless (Open Source), it is built on a view about a shared world which is quite the opposite of the MSFT credo of monopoly and total control. MSFT just does not belong here and this is a club where you have to earn and can't buy membership.

The public image of MSFT is bad beyond repair for this age.
Not only because Windows users are just sick and tired of the endless problems of their Windows computers and with the Vista failure MSFT now seems to be incompetent even in their own home turf.

What's worse than this ever increasing feeling about the incompetence of MSFT is that they are not cool at all.

What drives the success of all the new Internet success stories - from Facebook to YouTube - is that they radiate coolness.

In this century MSFT and cool just does not fit in a same sentence. Or paragraph.
Just compare a Steve Jobs or a Ballmer keynote speech to get the picture. Have you seen Ballmer jumping around the stage like an... okay, let's not insult any species just because they are lower on the food chain. Ballmer was jumping like Ballmer - the way he is.
If it wasn't Ballmer, MSFT should have sued the guy for causing billion dollar damage to the MSFT brand. Maybe it's not too late, if MSFT shareholders wake up and demand the board to take action.

MSFT is loosing the game slowly but certainly because the company looks like Ballmer jumping on the stage, smells ancient, sounds arrogant like a 90-year old rich bastard with a 16 year-old beauty at the wedding night of an arranged marriage.

It's just not cool... and people have the choice to do cool things...