Principled Profit: The Good Business Blog

Musings on the world-wide movement for ethical business, frugal marketing, and how honesty, integrity, and quality combine with deep relationship building to create business success. By the originator of the Ethical Business Pledge campaign and award-winning author of Principled Profit: Marketing That Puts People First and five other books

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Sunday, February 03, 2008

Microsoft + Yahoo–Will It Matter?

Scott Karp’s Publishing 2.0 blog has a very very interesting analysis of the proposed Microsoft/Yahoo merger:

The main problem with Microsoft and Yahoo, looking forward, is that they are not web-native companies — they rely on centralized control models, rather than distributed network models — thus they are not aligned with the grain of the web, which is a fundamentally a distributed network.

Microsoft and Yahoo rely on software lock-ins (Windows, Office, IM clients, web mail) to maintain their user bases — but without distributing any of that value to the network or harnessing the value that the network would give back if they did. As such, they do not benefit from network effects, which is precisely what powers Google — and why Google will likely still beat a combined Microsoft/Yahoo.

Jeff Jarvis, in Buzz Machine, also sees a similarity of operational strategies in these two giants:

Yahoo, I’ve long argued, is the last old media company, for it operates on the old-media model: It owns or controls content, markets to bring audience in, then bombards us with ads until we leave. Contrast that with Google, which comes to us with its ads and content and tools, all of which I can distribute on my blog. Yahoo, like media before it, is centralized. Google is distributed.

Maybe I’m thick, but I don’t really see the similarity. I see Yahoo as in many ways much more like Google than like Microsoft–and in many ways, as the precursor to all these Web 2.0 social networks springing up:

• Yahoo spread virally because it created a much better search experience–as Google did later to overcome it
• Yahoo has tried over and over again to broaden its offerings and provide one-stop shopping for free, a model which Google emulated
• Yahoo’s corporate culture is much more Silicon Valley-loosey goosey, while MS is much more of an old-line massive and rigidly structured corporation–more like its original partner IBM (read yahoo exec Tim Sanders’ book, Love is the Killer App, which I reviewed here–scroll down–for a look into Yahoo’s culture)

I would in fact argue that at least some Yahoo tools offer exactly the same kind of distributed power that Google does. For instance, Yahoo acquired, years ago, the first e-mail discussion group tools that really allowed anyone to set up and run a discussion list or newsletter (egroups, which had recently bought onelist) and rolled them into its own Yahoogroups–one of the few instances in which I find a Yahoo tool superior to Google’s version. How many hundreds of thousands of people are operating–for free–this very powerful and completely decentralized information creation and distribution method that once required a programmer and a pile of money?

In fact, other than placing ads, I can’t think of anything that Yahoo charges for–whereas MS’s whole model is based on expensive software and forced upgrades.

One thing all three companies, Microsoft, Yahoo, AND Google, have in common is their desire to aggregate massive amounts of information about their users–which makes me, personally, very nervous.

Overall, I agree that Google will be the victor–but not for the reasons Karp and Jarvis posit. Google will win because it just provides a much better user experience. Which would you rather search with: Google’s clean, pleasant interface, instant results, and much better ability to return the right pages on the first results page, or Yahoo’s visual bombardment, slower and less accurate results? Most people have chosen Google.


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