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Microsoft might buy Yahoo

I don't think Google is perfect, but I use their stuff. Yahoo is still making little innovations here and there -- typically under marketplace duress, rather than leading because they've come up with the next great thing. But the only time I go to Yahoo is for Yahoo Movies, to find out when and where movies are playing. Yahoo Finance is supposed to be pretty good, too.

Yahoo itself admits that we shouldn't expect a turnaround before 2009, and that sounds optimistic to me because one of the fundamental tenets of their turnaround strategy is to "open Yahoo's technology infrastructure to third-party programmers and publishers." Can this be done after the infrastructure of a company has been built? I doubt it. It's a bit like Microsoft trying to add "security" on top of Windows. Windows wasn't designed with networking and security in mind, and security in particular is not something that can be added as an afterthought. Security must be part of the fundamental architecture, not an optional add-on feature (see Unix for comparison).

Opening the technology infrastructure is only objective #3. Yahoo's first two objectives are to be a starting point for the most consumers on the Web and to make the company a top choice for marketers seeking to place ads on sites across the Web. Basically, to reverse the fortunes of Yahoo and Google. How likely is this to happen? For that matter, how could it happen? What is it that's going to make you go to Yahoo rather than Google when you want to search, or to place ads with Yahoo rather than with Google Adwords?

Here are two places where Yahoo could get the jump on Google, although I think Google is already working on both of these. First, charging for ads based on actual sales generated by the ads, rather than just click-throughs. Think about it. If you wanted to advertise something and you knew you'd only have to pay for the ad when the ad actually sold something, wouldn't you advertise a lot more? It would be completely risk-free. Yes, the cost of an ad-based sale would certainly be higher, but would that really make a difference if your choice was between selling something and not selling something? Personally, I think it would be a no-brainer.

The other thing that might bring me to Yahoo is the store system -- and I consider any changes in this area doubly unlikely because Yahoo already has an entrenched (and expensive) store system. Plus Google is apparently working towards what I'm about to describe.

What we need is a very easy way to know that a transaction has taken place, so it becomes trivial to program against the transaction-processing system. Right now it's far, far too hard. I tried it with Paypal, and that turned me off. The coupling is much too high. What I really want to do is know when a transaction has happened, and what that transaction is, and that's all. My program can then do whatever it needs to do without becoming entangled in the transaction-processing API. If this process becomes easy then it will cause a big increase in online transactions. If Yahoo did it before Google then I might try it. The downside is that it's going to cost me more because of Yahoo transaction fees, and with Google Checkout all I have to do is buy some adwords each month and I don't pay transaction fees. So I might change to Yahoo for awhile, but as soon as Google solves the problem and becomes the cheap solution then I'll probably just switch to Google.

And that's really the point. Maybe Yahoo has some fraction of the market now, and maybe they will recover in 2009, but right now they're kind of a failing company. What is a hostile takeover by Microsoft going to do for that?

Is Microsoft going to manage them back to health? It seems unlikely that the "maybe 2009" recovery will happen sooner after a hostile takeover.

And the really big question: Microsoft already has an Internet division: MSN. But they haven't been able to make that go anywhere. Yahoo made a good start at the beginning of the Web revolution, but then got stuck and faltered. Why on earth would combining the talents of Microsoft MSN and Yahoo produce anything other than more stumbling around in the dark? Which company would lead this recovery? At least Yahoo managed to make a strong start on the Web before driving into the weeds. But no, it would be the company that takes over, Microsoft, who brought us both MSN and Windows Vista.

How does combining a failing company (Yahoo) and a failed division of Microsoft (MSN) produce a successful division of Microsoft?

The one thing that the two companies have in common is the very thing that will make them both fail at this Web thing. They both believe that it's about centralization. The companies are built around that philosophy. Yahoo tried to create a central place where people would go on the Internet, which worked in the early wild-west days of the web -- Yahoo was the best thing out there for awhile -- and it's what caused Yahoo to slide as the Web became more decentralized. Yahoo's centralized services are no longer as good as their decentralized competitors. Now we have BBC for news, YouTube for video, etc. And Microsoft, of course, is the "Cathedral" in The Cathedral and the Bazaar.


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