It’s been 10 days since Microsoft-Yahoo deal was called off by Steve Ballmer, and in the days that followed the commentary and speculation has been churning at record pace.
Several times last week I was tempted to write this post, only to hold off for a while longer because I wanted to write something for my readers that would go well beyond a news rehash.
As I said in previous posts, it is easy to lose sight of the essentials in the dizzying onslaught of "Steve said, Jerry said…" titillation, investor and market timer stock price considerations, and "what’s the next step" agonizing. Instead let’s go back to Business Mind Hacks basics:
I have argued that the deal was never a good idea in the first place, and that this should have been the first and foremost question on anyone’s mind. Even now, there appear to be major Yahoo stockholders such as Carl Icahn, who are attempting to employ corporate board machinations to force the deal after all.
And of course there has been plenty of speculation that Microsoft would come back with the same or lower offer after having Yahoo’s stock price pummeled for a little while (incidentally, it didn’t go down quite as much as some had predicted, possibly a sign that the market viewed the deal was as in fact much less of a clear winner).
None of it would really matter as far as the fundamentals of the deal: That Google is the uncontested market leader in search and paid search ads, that neither Yahoo nor Microsoft have been able to compete effectively, and that they are falling further behind every day. (Notice recent earnings data showing Google’s search revenue is on track to surpass Microsoft’s flagging Windows/Vista revenues some time in 2009!)
There are several reasons for this, some technical, and some Branding/Positioning related and hence much more basic than the complex issues relating to e.g. paid search optimized monetization. I will further discuss the latter in another post. Let’s go with the branding issues for today.