Microhoo

Let’s face it, right now this is the biggest item to hit any and all business tech media. I’ve been trawling all my usual sources and they’re all providing their own coverage, even Mr. Shpigler the ’shark’ appears on the front page of Snotr (Mininova’s new video site) with this angle on negotiations:

(Edit: I can’t make the Snotr video embed. I’m working on it, but for the moment just click here to see it. Sorry!)

And why shouldn’t they be covering it? The effect and fallout from this move is what I believe will put 2008 on the map as that year when we expected “baby steps” happening (recalling coverage on GigaOm where the big prediction for 2008 was consolidating services and the blurring of lines between online and offline services) but instead got “bigfoot steps”, where suddenly we not only need to look at the innovations provided by wave after wave of super slick web 2.0 (and beyond) startups, but also at the Big Players.

My favourite coverage to date came tumbling out of my printer this morning because I thought it merited being a hard copy (“eww” – is how I usually view hard copies with that same disgusted look as The Plague from Hackers, but this really was good) which came from Bloomberg.com (kudos Ari Levy) and is now on ‘Update 3′ of the story. What I liked about this article was its detail, as we are told even what parties are whispering in the ears of Microsoft’s and Yahoo’s decision-makers. So hats off to Morgan Stanley who apparently don’t only make the shiniest credit card in my wallet, but are also accomplished consultants who have tents pitched outside Redmond right now.

What irks me though is that no one seems to care to DO something with this coverage, like go out on a limb and tell the world not just what the potential consequences of all of this are, but which one of those is most likely to play out. So I figured I’d have a try:

Potential scenario #1 (aka Most likely)
Microsoft drop an offer in Mr. Yang’s letterbox (subtle dig at how long this event is taking to unfold, it’s almost like they’re writing to each other with snail mail) to the tune of $35 per share, still with their 50/50 money/shares split, but this time give it the “don’t push your luck sonny” seal because we all know Yahoo! are going to ask time and again for it to be tipped beyond the $40 threshold.
Yahoo! accept because they’re running out of options and money so fast that soon they’ll start to lose the confidence of those 250+million users that they have from the glory days. What no one can predict is how well the two company’s services integrate. I sincerely hope that Yahoo!s successful projects like Flickr and delicious get used effectively.
Should Microsoft go down the integration path with Yahoo! products, then they should do this as if walking on eggshells and look only to make boundaries between entities blurred. What I mean by that relates back to my original point on GigaOm’s 2008 prediction of consolidating services. So many services have certain features that we prefer, be that because they’re better or easier, meaning that the average user of these online services has to have a million different accounts and logins. I am mega keen on ideas like OpenID, and we’re told now that some of the bigger companies like Microsoft and Google are signing up to these which can only be seen as a positive step.
I’m drifting, so my point is that when the time comes, Microsoft should set an example to Google of the best way to integrate another firm into your own and it should be open to the Yahoo! ways of leaving a product’s name and subsequent image well alone.
It should also ignore my last point when it comes to MSN Messenger and Yahoo! Instant Messenger – join them up – and work on a truly genius way to manage media. Yahoo! has some great media ideas that could really help out Microsoft with its online competition against Google. Microsoft clutch at Windows and Office because they are the standard now. But once people need more ‘on-the-go’ features and collaboration ability, then people are going to start to look towards Google Docs and Spreads, Zoho and all the other countless greats that are out there on the internet. I think that Yahoo! could really help Microsoft achieve their Office Live goals.

Potential scenario #2:
Google and Yahoo! end up uniting against Microsoft. This seems pretty unlikely to me. The Bloomberg article states that Eric Schmidt and Jerry Yang spoke on 4th February about a partnership. This would be huge for Google, who’d suddenly have one less competitor to think about in their home domain of search and advertising as they’d gain the resources of Yahoo!
But just how likely is this? In my opinion not very likely at all. I’d actually like this not to happen. I’m a firm believer in there being healthy competition, because it’s important to remember that competition drives innovation. Whilst Google’s insane growth rate since 2004 is something that deserves a sizable pat on the back for each and every member of their staff, it’s not going to continue at that pace if they’ve got no one to be in a race against.
BUT (yes, this but is much bigger) what’s especially important to note is that Google aren’t trying to BUY Yahoo!, they want a partnership. What does this really mean? It means that we’re looking at a different strategy type. Microsoft’s can be seen as dominant and expansive, and Google are simply just playing against that. They’re not actually interested or threatened by Yahoo! alone, and in creating this partnership, Yahoo! would still be stood on its own two feet. They know that ‘Microhoo’ would be a much greater blip on their radar, so the suggestion of a partnership is a play at Yang’s fierce independant streak. Very clever Mr. Schmidt!

Potential scenario #3:
Yahoo! stay solo. As mentionned in #2, Yang clearly (and quite rightly, he made a big player) has a fierce pride in his company, and would love to see it stood solely on its own platform, with its gigantic user base and smooth set of media features. It is at this stage that I’d like to say SORT IT OUT with Yahoo! Live, because I’m reading lots of bad things about the service. But that’s all I’m going to say, because I’m sure it must be seriously difficult to roll out something like that, to that many people, while being in the media spotlight, with a takeover proposition looming over your head. I am a big fan of Yahoo – in fact I think Yahoo was my first email account as a child and I even wore my Yahoo baseball cap to “Geeks vs Chavs” night at my local watering-hole to show my support – I’d love to see them continue to thrive on their own, to be my underdog in the “Big 3″ (Microsoft, Google and Yahoo! – what I currently deem as the three biggest players in tech) and to show everyone what it means to have that many trusting consumers that are there because they get an excellent service.
How likely is this though? I think it’s slightly more likely than a partnership with Google (perhaps), but lets face it, the stakeholders over at Yahoo! are seeing more $$$ coming their way by walking the M$ path. They’d be pretty stupid to stir Microsoft up, get them bidding in the price bracket that they’ve been angling for, and then to turn them down. Similarly, Microsoft could (relatively) easily just storm on in with a hostile takeover.

If asked to put my money where my mouth is, I’d be hedging my bets on Microsoft winning this round. I think they’ll suggest a price more in the direction that Yahoo! are hoping for, and Yang will announce that they’ve taken it.