What MicroHoo Might Be Like
Things have been quiet, very quiet at Yahoo (YHOO) and Microsoft (MSFT) this week, and that means one thing to me: A deal between the two has to be getting ever closer.
In fact, several sources within Yahoo tell me after a range of noisy internal activity by top brass–such as outlining plans for staff–has stopped, soon after Yahoo released its sunny-side-up growth plans recently (followed by investor displeasure at the underlying assumptions of blue skies ahead for the long-troubled portal).
And Microsoft has essentially gone radio silent. Said one source there: “We are being patient and open to listening.”
A raise in price is the most mentioned option, from $34 to $36 a share, but other things that could happen include everything from upping the cash versus stock ratio, to larding up retention packages to key Yahoo employees to giving Yahoo more independence as part of a deal.
But actually, if you really analyze what a post-Yahoo/Microsoft world would look like if the companies merged, Yahoo could and probably should remain a lot more independent and in control than it might appear.
While anything could happen (AOL? As Time Warner’s (TWX) stock declines, that’s a hard one), let’s do the quick walk-through anyway of what parts of such a landscape would look like, by trying to figure out which side–Microsoft or Yahoo–would essentially control the field in each key area of the NewCo, or at least the digital part of the union.
Communications, community, connectivity: It’s easy to see that Yahoo should run the show here, due to their obviously more robust and better designed set of tools to communicate and connect on the Web. The heart of its offering is email and related chat and other software.
Here, Yahoo has the potential to excel even more, with its recent acquisition of companies like Zimbra, as well we amazing and woefully under-leveraged assets like Flickr and del.ici.ous.
And while Yahoo has fumbled its many entries into social networking, Microsoft’s large investment in Facebook could give Yahoo back the opportunity it lost when it did not buy the hot social networking site when it had the chance. Imagine Facebook becoming Yahoo’s social networking partner, and Yahoo channeling all its users to Facebook.
Here, compared to weaker Microsoft execs, Yahoo’s Brad Garlinghouse is the obvious leader in this arena.
Technology: While this represents a wide swath cutting throughout the various services, Microsoft obviously has the upper hand here and that’s a good thing for Yahoo. While it has some top-notch tech talent, Yahoo obviously does not dominate in this arena, as it easily does in the more consumer-facing areas.
Let’s be honest–Yahoo is not and never has been a technology company. It is and always has been a new media and communications company that heavily uses technology.
So why not offload tech innovation and heavy lifting onto a company with technology at its heart like Microsoft, which is the only legitimate major competitor to Google (GOOG) and the only one with the kind of money and muscle to take it on.
In this regard, while Yahoo has a number of able tech execs, everything from ad and search technology to all kinds of tech operations should roll up within Microsoft’s leadership.
Media: Hands down, Yahoo. Since it first started MSN back in the mid-1990s, Microsoft has not created one compelling Web property that truly has captured the imagination of consumers.
I remember UnderWire and Mungo Park, even if no one else ever will, and none of it was pretty.
In contrast, Yahoo has dominated so many categories and continues to really shine (In fact, its new women’s site launching soon is called Shine).
Anchored by major sites like Autos, Finance and News, for example, Yahoo also has managed recently to put up a very strong celebrity site called OMG in the face of stiff competition.
For all its history, right down to today, even with all these dumb widgets competing for users’ attention, Yahoo continues to natively understand how to to entertain, inform and serve up their own and others content to consumers.
And while it remains weak in its video offerings (it will never, ever catch Google’s YouTube), Yahoo still is the best option for distribution by major media companies, which have been making efforts of their own–like the Hulu.com video portal by NBC Universal and News Corp. (NWS)
Thus Media head Scott Moore, a former Microsoft exec, in fact, would be the choice here.
Advertising: This is a tricky one, given Yahoo has the strongest staff in terms of the critical area of online display advertising, which is one of the best parts of this deal for Microsoft.
But it is clear the leaders in this part of the business will be from Microsoft, with executives like Brian McAndrews and Kevin Johnson. But it is clear that just below them, Yahoo has the real strength here.
I would imagine Microsoft, for example, would be smart to keep a well-liked exec like Yahoo’s ad chief Hilary Schneider and those below her right where they are, as they are far more experienced.
As I wrote above, this does not mean that Yahoo should run the technology behind all this, although I am told that its improvements in its display product that has been dubbed Project Apex are promising.
Leadership: This, of course, is the billion-dollar question. Who will lead the digital unit of the merged entity? I am guessing all the top execs at Yahoo would be gone quickly in a deal, although there is a bold move for Microsoft to make.
And that is: Put Yahoo Co-Founder and CEO Jerry Yang on its board and make President Sue Decker the head of Yahoo at Microsoft.
A longshot, of course, but it could happen.
Please see this disclosure related to me and Google.