Sunday, February 10, 2008

Microsoft's Yahoo! Acquisition is Bold. And Dumb.

Please, Yahoo!: fight to stay independent. Or at least tear yourself apart and pop a couple of poison pills to go out on your own terms before this goes much further. Yeah, I've got your double-suck cake for you: one layer Yahoo!, one layer Microsoft.

I was on the internal Microsoftie bandwagon that Steve Ballmer was steering not too long ago that an acquisition of Yahoo! didn't make sense for Microsoft. So when the unsolicited offer went through, I was like a whole bunch of other confused senior people looking around trying to figure out what changed and why this suddenly was the right thing to do and to bet the company on.

I recognize that huge change for the future is typically greeted with 95% critical negativity. People don't like to change and huge change is an immense leadership challenge, especially when the change is the right thing to do and very few can see that perspective. So I've done my best to be open and accept that Yahoo!'s acquisition by Microsoft is a good strategic move for Microsoft, for our customer's, for Yahoo!'s customers, the shareholders, and for Internet users in general.

I haven't gotten there.

In fact, this still seems like a real dumb idea, like a staggering drunk trying to prop himself on an unwilling and lame adversary who wouldn't mind seeing the drunk facedown on the pavement. The only arguments that are half appealing are those that suppose there's going to be a $110,000,000,000USD annual online ad-market, and Microsoft + Yahoo! gets a third of that market. Hand-waving, "The acquisition pays for itself!" Yeah, okay, give me that dream and a milkshake and at least I get to enjoy the milkshake.

Some interesting posts on this:

Of course there's one big thing I haven't touched on: headcount. Let's see, why did I start this blog? Oh, yes: Microsoft has become way too huge to be effective and nimble in the creation of focused, passion-driven software. Fourteen-thousand or so demoralized people thrown on the heap does not help in the least. That's the amount we need to go down, not up. What is this, Bizarro Microsoft?

Have you brought up HeadTrax recently to see how many positions report up to the top? Give it a go. And how many people report to the various presidents. Any surprises?

Microsoft absorbing Yahoo! doesn't make sense to me given the extreme overlap in offerings that neither Microsoft nor Yahoo! have been terribly effective at. How many success stories have there been lately at Yahoo!? I like their portal. I use their search on occasion (only when Live Search and Google give me disappointing results). And their acquisition of flickr was really good for them, along with not screwing flickr up (and flickr users, you gotta know Microsoft would be pretty hands-off of flickr, other than probably putting a Live ID sign-in bar or such on there).

The only argument I've heard that makes sense from a conspiratorial Machiavellian kind of angle is that this is an opportunistic move to bust and cripple the already lame business adversary we have in Yahoo! We don't really want Yahoo!, but rather see this as an opportunity to kneecap and sideline them, pointing out their vulnerability to acquisition and angering their frustrated shareholders into revolt, all while putting them under the microscope of the analysts, pointing out their various failed and marginal ventures. And some glimmers of potential. But mostly, Yahoo! continues to come up in an unflattering light as people scratch their head as to how they'd help Microsoft at all.

If the acquisition doesn't go through, Yahoo! certainly emerges with several broken bones and bruises. Rebuilding from that will be a struggle that will require drastic and draconian decision making.

And the MSN, search, and ads folk at Microsoft certainly shouldn't be too proud right now, because you guys are under as much scrutiny as Yahoo!. Why are we proposing blowing $22,000,000,000USD in cash and going into debt? Because Yahoo! has something done right - relative to us, according to our leadership - that you haven't been able to do. Is there a Microsoft online-services leadership shake-up coming? One can hope. The fact that we've initiated this acquisition, for whatever reason, means that the people in charge haven't been able to deliver and are not on a path to deliver. Accountability?

I do want to see the strategic importance in this huge, complicated take-over. I do want to believe. If this all about ads and the acquisition goes forward I need the influentials in Microsoft leadership to connect with me and convince me to believe that this is indeed the next important foundation for Microsoft. To tell you the truth, if you had pulled me aside when I was in school, holding court in the computer science lab, and whispered in my ear ala The Graduate: "online ads..." I would have laughed my geek butt off.

So Google gets to have the joke on me, but for us to bet the company and build Microsoft's future foundation on ads revenue? WTF? As someone who considers themselves a citizen, not a consumer, I want to create software experiences that make people's lives delightful and better, not that sells them crap they don't need while putting them deeper into debt. I'm going to be in purgatory long enough as is.

Yes, okay, we should have a team do an advertising platform and do it well, but the money chest can be better invested across the company, let alone avoiding going into debt and putting us on another spiral of doubt and angst in the stock market, all while dealing with anti-trust maneuvering in Europe.

The attempt to acquire Yahoo! is a bold move. But bold and dumb are not exclusive. Q.E.D.

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