Once upon a time, Microsoft was the market maker. They grew the PC market steadily from a tiny hobbyists niche to a PC on every desktop.
The operating systems business fed the applications business, which in turn, fed the server business. Microsoft drove an economy based on a steady upgrade cycle, giving rise to an industry business model defined by a recurring series of high dollar purchases for the end-consumer.
They were fast followers, which is to say that Microsoft’s dominance was less about creating wholly new markets (think: Apple) and more about recognizing newly-forming markets, embracing the market innovation and then wholly integrating it into their strategy.
When they focused on winning a market, they were pretty unbeatable. Just ask Lotus, Borland, WordPerfect, dBase, Sybase, Novell and Netscape.
The analogy that best frames their aggressive pursuit of market dominance was that they were like the football team that was winning 99-0 and still running up the score. Culturally, they played at only one speed, which unquestionably translated to a measure of antipathy towards the company.
Then something interesting happened. As more of the computing experience shifted to the online universe, Microsoft slowly ceased to be the one true market maker.
That is not to diminish their economy, which remains huge. But, the fact of the matter is that new market maker is, after all, Google.
First Google nailed search. Then they successfully launched and faithfully stewarded a self-service ad supported marketplace that has grown them into a hugely profitable $20B market gorilla.
The larger success of this model opened the door to a proliferation of predominantly free online services, like email, news, mapping services and video. And those are just the segments that Google has a strong foothold in.
Facebook and the social networking universe are offspring of the Google economy. So too, is Yelp, Perez Hilton and TechCrunch. Economically-speaking, print publishing is being swallowed by online media. It seems inevitable that the entertainment industry will more formally plug into the Google engine sooner rather than later.
The information-driven economy, of which Google is the market maker, is fundamentally about cultivating and systematically growing user engagement time, and then monetizing that engagement via an ad-supported business model.
It is with this backdrop, one should contemplate a union between Microsoft and Yahoo, and what it does to the competitive balance in the market.
Umair Haque of Bubblegeneration puts it best, “I hate to be so blunt, but I’m short of time today, so let me offer a guess: Yahoo + Microsoft isn’t just a mistake - it’s a double suicide; a fatal error. Why? Neither company has the DNA to take on Google (let alone the massive number of startups waiting in the wings).”
Amen, Brother. Truer words were never spoken.
Why you say? For one thing, Microsoft generally subsumes, they don't do synergistic co-existence very well. Plus, they are now large, bureaucratic and slow moving.
By contrast, Yahoo, despite a magnificent footprint of users and services used by users, not to mention content, media and agency relationships, has never seemed to be able to connect the dots for their users. This is a cardinal sin, but organizationally, they are too silo'd to cross that chasm, which is their folly.
Thus, Microsoft plus Yahoo feels like a 1 + 1 equals less than two outcome, doesn't it?
