Gates Explains Microsoft's Need for Yahoo

eldavojohn writes "Perhaps it's obvious to you and perhaps you'll be pleasantly surprised by his answer but Gates revealed to CNet why Microsoft needs Yahoo. From his response, "We have a strategy for competing in the search space that Google dominates today, that we'll pursue that we had before we made the Yahoo offer, and that we can pursue without that. It involves breakthrough engineering. We think that the combination with Yahoo would accelerate things in a very exciting way, because they do have great engineers, they have done a lot of great work. So, if you combine their work and our work, the speed at which you can innovate and get things done is just dramatically more rapid. So, it's really about the people there that want to join in and create a better search, better portal for a very broad set of customers. That's the vision that's behind saying, hey, wouldn't this be a great combination.""

Translation

[rucs_hack]

"Without Yahoo, we are years behind, and likely to stay that way"

Am I right or am I right?

Re:Breakthrough Engineering?

[morgan_greywolf]

Microsoft's approach to breakthrough engineering is through acquisitions? Is it just me or do I sense an oxymoron here...

Yes. Just like "innovated" PowerPoint and they "innovated" MS-DOS, etc. Bill Gates thinks "innovate" == "acquire through any means necessary".

Boil it down

[Wannabe Code Monkey]

better portal for a very broad set of customers

You can boil his entire quote down to the above 7 words. Microsoft likes nothing more than to get their name/software/web properties in front of everyone's face. Adding Yahoo and all Yahoo's users to their portfolio is what they want. Imagine if all of a sudden everyone with a @yahoo.com email address automatically had a Passport account... all of a sudden Yahoo messenger is 100% compatible with MSN messenger.

No Zimbra???

[jkrise]

Just an hour ago, I spoke to a Zimbra partner, and he informs me that in case MS does get to buy Yahoo, Zimbra would be out of it, to allay antitrust fears. That would mean Zimbra will have to be sold back by Yahoo and bought over by some other company. Is this true? Or is the popularity of Zimbra the reason why Microsoft would buy Yahoo to kill it off?

Re:Boil it down

[ubannoying]

The problem with this plan is that many of these "customers" use the yahoo portal because they find to be the better portal as it currently is. If Microsoft takes over Yahoo, what are the odds that they'll leave the portal alone? Slim to none, I'd say. If they "innovate" it into the MSN portal, I think they'll lose a lot of customers, and find that they didn't really gain a lot in the acquisition.

Why Microsoft REALLY wants Yahoo

[mlwmohawk]

It is not very well known, but I remember talking to an engineer at Yahoo, and I asked, "How do you make money?" He said, this was a couple years ago, that 60% of all e-commerce sites were hosted by yahoo. Think about that, credit cards, transactions, data, users, etc. M$ would live to control that.

Think of all the anti-competitive stuff they could do. Subtle problems with non-windows platforms or non IE browsers. A requirement of Microsoft Wallet. (Remember that?)

There are a ton of reasons why Yahoo owned by microsoft would be a bad thing for the world. I hope Yahoo remains independent.

MS track record moving research to products

[david.emery]

Microsoft Labs has done some really great stuff. But you don't see it in their products. That's why I have a really hard time believing MS can -execute- what Bill Gates proposed.

If you look at MS's desktop products, in particular, you see a pattern of buying a good product and then as part of integrating it, making it more and more baroque and buggy and security-vulnerable.

Reminds me of the comment I read somewhere during the MS anti-trust debates: "If Microsoft is so keen on innovation, fine. The decision of the court should be that Microsoft is free to innovate using ONLY their internal resources, but is restricted from acquiring any technology from other sources. This enables the Market to work better, by allowing innovations to move freely." I had friends working on a start-up, when Microsoft announced a potential competitor piece of -vapor-ware-, their funding dried up immediately, and MS never did deliver the goods...

dave

It's the ad technology, not the search technology

[Animats]

I'm not sure that search technology matters all that much. For the first half of 2007, Yahoo search was probably better than Google search. Yahoo had all those special cases (weather, celebrities, stocks, etc.) working before Google did. Yet Yahoo's market share barely moved.

What matters for profitability is the effectiveness of the advertising-delivery system. In that, Google is way ahead of Yahoo, MSN, and the little guys (Ask, Mahalo, Wikia, etc.) Yahoo top management knew this in 2006 but couldn't catch up.

If Microsoft has some great idea, it's probably on the ad side, not the search side. They control a browser, so they can put in something intrusive if they want.

Re:Brute force and ignorance

[haystor]

There was no real quality of search results when that fight took place. It was a different era, with little more than keyword lookups.

Maybe the MS/Yahoo team could come up with some unforeseen technology that obsoletes Google but nobody knows what that would be. Unless you believe Yahoo has some unreleased, revolutionary technology, I'd have to say the bulk of the price paid for Yahoo would be for their customer base.

The preceding isn't strictly true. You'd have to value the company based on current operational profits, cash, real and other assets. The price above these that MS is willing to pay is "goodwill" which would be attributed to "synergy of shared resources" or "customer list". I'm going with customer list or eyeballs.

I offer these opinions here because nobody asks me to run their trillion dollar company.

Re:Brute force and ignorance

[naoursla]

But Google was first to the search market with effective statistical natural language processing techniques.