When I fired up my laptop on Friday, I was surprised by the first tweet that caught my attention in the Twitter - stream. "Microsoft and Yahoo...wow!". Wow was the right sentiment, IMHO... this is BIG news. So I surfed on over to the NY Times to figure our what was behind the headline. The letter sent by Microsoft to Yahoo is great read to get a sense of the tone set by Microsoft. Everything you need to know to get started is right there.

Thinking about this over the weekend, it became clear to me that this takeover attempt by Microsoft is ultimately their recognition that the search wars are over (note: they lost). Google is firmly in the lead and continues to create more real estate for their core ad business, with a mobile phone platform on the horizon.

In the meantime, Microsoft builds out content to support their core software business. So where does Yahoo fit? It seems to me they would firmly place Microsoft in a power position when it comes to community. Just look at Yahoo's purpose, "Powering communities to create indispensable experiences, built on trust." Then take a look at the community properties under the Yahoo umbrella (Flickr, del.icio.us, Upcoming and more) and it starts to make sense.

This acquisition also gives Microsoft access to Yahoo's over 500 million global users for their launch of Windows Office Live, giving them a strong position in the face of Google's (and others) online office-like apps. This is starting to look more like a showdown than a hoedown.

It's no surprise that Google is looking into how they can block this deal. The combined companies pose a great threat in advertising, online office apps and ultimately, search.

Interestingly, I think that last one (search) is the secret sauce of this deal. Microsoft picks up one the market leaders in social bookmarking (del.icio.us), which is where I think search is ultimately headed. Playing with a relatively new social bookmarking service this weekend (Mahalo), I was struck by how compelling it is to build a community of like-minded members and stockpile their favorite bookmarks. Now, I've been doing this for several years on del.icio.us, but the experience on Mahalo is far superior. Ultimately, Microsoft could give del.icio.us a facelift and, combined with the existing critical mass of users, quickly become the market leader in social bookmarking. Now that's something to get excited about!

What do you think? Is the Microsoft/Yahoo good for you?

1. By

Ed Stafford Location: Unknown Member since:12/10/2007 View Full Profile >

estafford on 2/4/2008
Jim, Good job connecting the dots and making a case for the value of the online applications to hold a front against Google. I'd have to say that this is definitely where MS would get the most out of a merger. MS has tried a number of times in the past to get a foot-hold in search, but managed to fail every time. Their strength is in software and I don't see the search options being very high on their to-do list. Lately, I am reading a lot of buzz about the threat that Google Apps creates as it appears to be positioning itself to compete with MS Office apps thorugh Google docs and other web based applications - and to be honest, I log onto Google and use their suite more than I use MS office (word, excel) these days. The tools that Google provides now, when combined, can be very powerful. Keep in mind that the majority of these GAPS (google apps) are still Beta. I really think MS can do something great with the apps they would acquire to strengthen their existing products including Office Live, while adding some new ones to their lineup to maintain a competitive edge against Google. But I just can't see them pulling off the search piece given their history. Even Yahoo is having trouble, and that IS their business. I do not believe MS will be good for Yahoo and especially not Yahoo's search. In simple terms, Microsoft is doing what Microsoft does best - buying other technology and applying it to their own products. I think the Google move to "torpedo" the merger is driven more by a desire to now dominate the application space. Google has created a unique space for itself by delivering their GAPS. Now throw all that data that Google controls behind them, and the possibilities are almost limitless. The merger would give MS the tools/boost it needs to turn it up a bit in this area.

---

2. By

Hidden Hidden Location: Hidden Member since:9/11/2006 View Full Profile >

astrout on 2/5/2008
Jim - I too am excited about the potential for this deal. As much as I love Google (and have admit to using dozens of their applications) it would be nice to see someone come in and level the playing field a little bit. I also agree with you that social bookmarking is going to be huge and to that end, the acquisition of deli.cio.us and flickr (both owned by Yahoo) as part of this deal are one of the main drivers. To me, this is a win-win for everyone including Google (to keep them more competitive down the stretch.)

---

3. By

Ales Nohel Location: Hidden Member since:9/13/2007 View Full Profile >

Wiz4rd on 2/14/2008
Microsoft/Yahoo is a good match and I most certainly prefer the takeover by Microsoft than FOX. Google transformed quickly from an underdog to the sculptors of opinions without ethics so YahooFOX might be better at challenging Google from this angle. In any case status quo would be preferable from "users' choice" prespective.

---