Microsoft + Yahoo = No Longer a Recipe for Success

by: Dana Gardner

Is Microsoft (NASDAQ:MSFT) buying Yahoo! (NASDAQ:YHOO) because it has succeeded in its own Windows Everywhere strategy and 12 years of lackluster performance on the Web?

Is Microsoft trying to buy Yahoo! because Yahoo! is seemingly at a weak point, unable to dominate in the key areas of search, advertising, and media?

Nope, Microsoft is trying to buy Yahoo! because neither Microsoft nor Yahoo! is succeeding on the Web in the ways that they should. And how much sense does putting them together make now? Not as much as it did two years ago when Yahoo! was stronger and Google (NASDAQ:GOOG) was weaker. We should also thrown in that Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) are also much stronger now than at any time in the past.

So once again, we have Microsoft throwing outrageous amounts of money late at what should have been an obvious merger for them a long time ago. I recall a discussion on the Gillmor Gang podcast at least two years ago that wondered when -- not if -- Microsoft would buy Yahoo! Most of those on the call, including me, said it was the only outcome for Yahoo! and the only way for Microsoft to blunt Google.

But that was then, and this is now. So the burning question today is not whether a Microsoft-Yahoo! mashup makes sense -- it has made sense for years. The question is whether it makes sense now, at this outlandish price, and if this in fact marks the point where Microsoft makes a desperate and devastating mistake.

Is the Yahoo! cloud built on Windows? Nope. So the model of Windows Everywhere is junk. Will the burgeoning Microsoft cloud and the aging Yahoo clouds work well together? Will one be able to absorb the other? I say no to both. These will be separate and ill-fitting infrastructures. Will the Redmond and Silicon Valley cultures work well, or will huge layoffs in California portend even more gridlock in the eastern Seattle suburbs?

Will the world like getting their news from Microsoft? Which search engine will I get when I log in? Which email will I get when I log in? Which company will be the one I think of as the "brand"?

And for the enterprises that have invested their fates in Microsoft infrastructure, how will they get their Web services? Will it be Yahoo! for the consumers, and Microsoft Live or the business folk? Or vice versa?

This proposed deal smacks of desperation, not multiplication of growth opportunities. But the price premium probably makes it inevitable. The only way to make this work is for Microsoft to spread itself more thickly as a media, advertising, technology, services, platform, tool -- everything to everybody. The risk is to be less and less of anything to anybody.

This may end up just driving more consumers and businesses into the waiting arms of the singularly understood Google, Apple, and IBM (NYSE:IBM). And I for one will miss both Yahoo! and Microsoft because whatever they cobble together from the two won't be able to do the same that either did separately. Not a good recipe for success. Not any more.

About this article:

Problem with this article? Please tell us. Disagree with this article? .