I don't know if Barry Ritholtz thinks Microsoft should buy Yahoo this time around, but he's becoming more convinced that they will (here's a link to his post). I agree that they will hammer something out and not take no for an answer this time, for the same reason that I believe they should not. Psychology: the same psychology that goes into paid search buys themselves. When a person or business needs to give the growth/eyeball acquisition engine a nudge, they go out to a paid search provider (o.k., they go to Google). They plunk down their cash, generate the growth in audience (not necessarily customers though), and from there they hopefully have a compelling enough destination for these eyeballs to generate some benefit from the additional site traffic. It frequently doesn't work though, and what they find themselves with are more eyeballs, less money in the coffers, and no additional benefit to their business, since they have a destination worth paying people to visit.
The same scenario can be in play with the big boys, with MSFT looking to grow their ad search business through the acquisition of YHOO and then be able to more effectively compete with GOOG. Unfortunately though, they still won't have the thing that gets people to choose Google's offering over either Microsoft's or Yahoo's - whatever that "thing" may be. So they will find themselves with lots more paid search customers for the time being, lots less money in the coffers, and still no compelling reason for Google customers or future customers to choose them over Google (if customers are not choosing either Yahoo's or Microsoft's offering now, why would choose a combined offering? More combined eyeballs? No - clicks are priced per click, so customers could just do Microsoft and Yahoo separately now if that's what they wanted). Like a company putting a lot of money into a paid search campaign, MicroHoo will see a short-lived burst of additional activity generated by interest and publicity from the deal, followed by resumption of their (now combined) slow fade into irrelevance, obscurity, and oblivion.
In the meantime, 3 guys in an apartment are putting their hearts, souls, family's money, and spare time into building something that will make the web a little more entertaining and easier to work with than it currently is, and once they get something working, word of their new "thing" will virally spread over a few weeks to garner 10 million users, and will be purchased by Google for a billion dollars - only this time, Google will only wait 6-9 months before purchasing, unlike the year they waited with YouTube, by which time YahSoft's MBAs and acquisitions group will have just completed their analysis.
Comments