What Yahoo Needs Isn't Microsoft–It Needs a Jelly Declaration
Please see this disclosure related to me and Google.
A Microsoft-Yahoo merger is a deal only an investment banker could love. I had mentioned the incessant wishful thinking about such a union and ongoing talks between the Web and tech giants in a post last week, before new-and-improved rumors of a $50 billion deal got trotted out first in the New York Post Friday and then got picked up elsewhere.
Finally, a report in The Wall Street Journal Saturday pooh-poohed the supposed mega-pairing and downgraded the big deal to more of the usual blabbing that has gone on between them for many years now.
And that–let me hope and pray for Yahoo’s sake–is where it will likely end. Such a deal would be a gooey, sticky mess for Yahoo, so I guess someone there needs to get working on a Jelly Declaration. It could be a sequel, of course, to the controversial “Peanut Butter Manifesto,” penned by Yahoo Senior Vice President Brad Garlinghouse last year. It noted–among other problems–that the company was spreading itself too thin and major changes in management and vision needed to come quickly.
Indeed, but does that really mean Yahoo needs to marry up with Microsoft?
No, according to my sources, who said the deal is a Microsoft dream more than a Yahoo one. In fact, very few key executives at Yahoo are backing it (and several high-ranking ones have told me they would leave immediately if such a deal came to pass), and this is an important point.
As anyone who has covered the company for any length of time knows, Yahoo’s record on major decision-making has been akin to a hippie commune–a lot of wrangling internally in a culture where everyone seems to have a voice and a reticence to push the button to launch.
That happened when Yahoo almost bought auction giant eBay back in the last century, which was a deal that might have been a good one. But it got nixed soundly by Co-Founder David Filo, in spite of then-CEO Tim Koogle’s desire to get it done. More recently, Yahoo had the same thing occur with both YouTube, which went to Google, and Facebook, which stayed independent.
Right now, said sources, Yahoo is listening respectfully to entreaties from Microsoft, which is also not known for its quick moves in the acquisition game–it is known as a company that does a lot of due diligence, according to potential acquirees. Need proof? Consider its losing out to the clearly more acquisition-reckless Google in the recent tussle over owning online-ad service DoubleClick. In contrast, can’t you just hear Google’s LarGey just saying “Let’s do it,” as they head out kite-surfing?
As always in this latest time of merger-fever, a link between Yahoo and Time Warner’s AOL unit is also bandied about, as well as a possible deal with Barry Diller’s sassier Ask search service.
But, as I also wrote last week, it makes better sense that Yahoo remain independent, given its amazing and impressive assets to leverage and improve upon. Nothing could be worse for the company than a needless merger with what would likely be a very bossy owner, and that will only serve to distract it at a critical time.
In his first Yahoo-heal-thyself memo, Garlinghouse was right, but now he needs to follow up. So, to help him, I jotted down some quick suggested notes about why Yahoo needs to think carefully before making a big move like a merger with Microsoft:
IT’S REACTIVE: Such a merger’s raison d’etre could be summed up in one word: Google. It’s true that Google’s online ad revenues and market share best Yahoo and Microsoft in a massive way, but doing a merger just to catch up does not necessarily mean they will catch up. While it is often true that the enemy of my enemy is my friend, it seems like Yahoo’s almost obsessive focus on Google is taking away from its other businesses. And, if Yahoo and Microsoft merged, their combined Googlemania would leap into overdrive. While it’s good to pay attention to the competition, it could get a little stalkerish with their union.
IT’S COMPLICATED: With Yahoo’s 11,700 employees joining Microsoft’s 76,500, can we discuss the complexity that would be generated? And can we all repeat, as a reminder of possible nightmare scenarios: AOL Time Warner? Such a merger would also take forever, too, which would be a boon to all its competitors. Finally, let’s be honest–both companies have management and reporting structures already in need of overhaul (right now, for example, Microsoft’s MSN has its services and its technology inexplicably split between different managers). So sorting out new structures would be as easy as getting Diggnation to behave.
IT’S PREMATURE: Sometimes you have to wonder what ever happened to Yahoo’s self-esteem, if it is considering such a deal. It just contorted itself to complete its new Panama advertising-system upgrade to better compete with Google. And, while its most recent results blew no one’s socks off, it is way too early in the roll-out to sell. If the system does well or even better than expected, Yahoo’s stock should rise, and a $50 billion price could look like a bargain. In addition, it has recently made a number of interesting inroads with newspapers, as well as a deal with cable giant Comcast, all of which could bear lucrative fruit. And, let me stress this again, its major products–like email and content–remain among the best on the Web. Why act like an also-ran in that department?
IT’S DEPRESSING: Simply put, if Yahoo did decide to sell to Microsoft, it would be the end, and not the beginning, for the company. Even if its name remains, Yahoos need only recall what happened to the company that gave it its first big opportunity on the Web by listing the Yahoo directory on its powerful site. The minute it was bought by AOL in 1998, Netscape effectively was finished, and today its influence is negligible. That’s a fate Yahoo must avoid.