Yahoo! Microsoft Love-Hate Relationship

The Internet business has a funny side. Let us have a reality check. How many times any of us has taken a buying decision seeing an online advertisement? Whatever may be our answer, that does not affect the earnings of Google or Yahoo!. For some time, we will have to again forget why did the dot-com burst happen when the Internet business was so lucrative!! Now, the recent buzz is Microsoft’s offer to Yahoo!, which has been rejected as being undervalued. Today, Yahoo! has a market capitalization of around US$42 billion and Google of about US$162 billion. These valuations are much higher than those of the high technology innovation giants like Motorola with market capitalization of around US$26 billion, Ericssion $33 billion and Nokia $162 billion. 

Even companies like IBM and HP have market capitalization of around $148 billion and $110 billion, respectively, which are lower than Google. This leads us to think about various complicated issues like online Internet portals which created a real value by simplistic excellent innovations what made them ahead of giants who had spent billions of dollars on research & development, patenting, etc.?

Here, if I am asked a question: is the show of Google and Yahoo! a pure hype? My answer will be: yes. Then, should Microsoft write a cheque of around $50 billion in favour of Yahoo!, my answer will again be: yes. Sounds contradicting, confusing and interesting!

Although we know a lot about Yahoo! and Google, let us try to see what they are actually into. Yahoo!, in addition to its not-so-popular search engine as compared to Google, has an excellent mail service and toolbars which are extremely popular. This also offers online properties, various tools and marketing solutions to businesses. Its mobile and local services are picking up. It also has some good products like Shopping, Kelkoo, Auctions for shopping, real estate information, Travel, Autos to price and compare cars online and personalized services. In addition to these, its Internet chat service and groups enjoy huge popularity with a mass user base.

Similarly, in addition to its extremely popular search targeted advertising with Internet search solutions, Google provides intranet solutions via an enterprise search appliance etc. The company is extremely interested in content space and its acquisitions of Blog and YouTube bring good value with a large user base. Its communication, collaboration and communities along with Gmail which is Google’s Web mail service come with built-in Google search technology for searching emails which are gaining extreme popularity. Its Orkut enables users to search and connect to other users through networks of trusted friends, Blogger – a Web-based publishing tool that lets people publish to the Web using Weblogs and Google Docs and Spreadsheets which allow users to create, view and edit documents and spreadsheets using a browser had redefined the way a user is using Internet. The new products of Google like Google earth, Google talk had redefined the way Internet can be treated and will affect our daily lives. The focus of Google to build local contents will even make a more impact on everybody’s daily life for accessing digital contents online and leading a pure e-lifestyle.

With the description given above, primarily these two web sites provide tons of information on their search engines in a simple speedy way. Millions of users have created their email accounts with them and other informative and entertainment resources bring the users repeatedly to them. Most of Internet users have made any of these two sites as their default web pages. New Internet segments like groups, networking, Blog and Chat are also attracting millions of users to these sites.

Now, who is paying for these free services which you and I are enjoying at Yahoo! and Google or at any other site? The answer is straight and simple: there are online advertisements which are basically auctioned for pages and are highly popular on per- click basis. The web sites provide very user-friendly and transparent systems which help the advertiser to optimize their visibility with the searches similar to their offerings. It is a good business. The advertisers spend a very small amount of money for online advertising than any other alternative channel. This makes them comfortable and they need not monitor a quantitative benefit which arises from the online ads. Millions of advertisers willingness to spend and not force a qualitative SLA on business benefits makes hundreds of billion dollars what big search companies are earning today. This is bitter but true. Instead of these, there is no such compelling avenue in any search site or similar web site globally today where business worth billions of dollars can be generated and sustained year after year.

Portals like Monster.com, ebay.com and amazon.com and some others should be separated from these big daddies of today who are highly hyped over a big hollow balloon. Today, I see and will predict a bad news if Microsoft takes over Yahoo!. After a few years, Google may collapse. Then, it is better Google to take over Yahoo! by paying double what MS is offering to them. It is not a fantasy story at its best, but look at your PC! I am sure you might be reading this article in an IE browser provided by Microsoft. The PC may have Windows XP or Vista. You may be a professional or self-employed entrepreneur or a student or a retired professional or a housewife or a jobseeker and the list goes on. One thing common in most of these users is that in more than 90 per cent of the cases the PC may be running Microsoft platform which may be either genuine or not-so-genuine. An average user spends more than 90 per cent of his time in office applications of PC, which are primarily mail, word document, Excel or PowerPoint presentation. I am ignoring here the games or small entertainments etc. which a user uses. For other information or data collection, the next biggest utility of office package is Internet Explorer. Now, I am going to explain to you how your life and business will change if MS acquires Yahoo!. Let me guess there will be a new bundled application called MS-Yahoo! in MS-Office.

I want to give here two examples. How significant or insignificant are searches today and what actually a hidden search wish-list of every user is? We have a habit to accommodate with our search engines whether the search result is good or bad. I had made a search on “Oracle design guide” on Google and Yahoo!. The results are given below.

I am not happy with the search results of any of these sites because it does not meet my requirements. I will advise you to do the same exercise on your own and try to analyze the search results and map it with your expectations. You may not be satisfied, always. Even more than 70% of the time you will not get what you are looking for. It means more than 50% searches worldwide do not yield what is expected! Here take a deviation. You want to know Mexico Airlines web site to book your ticket from Los Angeles to Mexico city, but you do not know the same. You make a search like Air Mexico or Mexico airlines you will get the web site correctly on a search engine as aeromexico.com. Here, you need to have an observation. Searching the correct web site is a major chunk of web search today. These search users are very low potential targets or see any value what the sponsored URL’s available in their search results. Others are specific searches like Java, ERP, etc.

Perhaps, it is now clear what all the hype is about the searches. We need information, and we need the correct relevant information. If you find a total customized search engine as an Office application on your PC, it may be possible that it meets all your search needs. You may create your virtual world based on your need and profile what you should get. Let me give an example here. I may customize my search with respect to Indian sites. These should be listed from bottom to top based on the nearest entities to the farthest. If the application gives me a local cache the searched and visited sites stored locally I can browse offline. If the download is required from search, I can flag it and leave it to be automatically downloaded. From a pure basic search perspective as level one, this PC office application will do a miracle to most of the users if the following basic things are taken care of: 

1. Select the search outputs based on the user’s need. 

2. Create a logical dashboard in cache where the searches are indexed and web pages downloaded offline. The dashboard should also get updates on the same subject line automatically. 

3. Do an automatic virus scanning and checks for spyware, spam, tracking cookies, etc. when the web URL is available in the search output. 

This will give every user a new experience in using the search. This may be totally personalized with password protected and if tools can be put which can export these to word or presentation files the world of personal computing will see a new high.

Now, let me take to level 2 of user value and business impact, considering that Microsoft may acquire Yahoo! and an imaginary MS-Yahoo! application will be in Office suite. Consider the broad segment and profile of content Yahoo! nurtures in its site. Unfortunately, today none of these major contents are polished for business use. The groups are not also tightly and easily bonded. The contents starting from game and media till software can be brought to an organized workplace. The virtual working community for various aspects can be brought to a near real interactive community. If a group of software developers get tightly integrated and work on a common plane, the output will be of immense business volume with strong IP protections. The rise in business like game market and mobile content will be on a free open source share platform with utmost protection of data privacy and business values. Here, the users will define the market, need of solution and guide the business needs. This will touch every user with taking care whatever he or she needs. The users rating and suggestions can create an online real-time evaluation with specific target audience seeing it first hand. If a small-time developer or a past time content syndication expert created his product, MS-Yahoo! may be the right spot where he can publish to like-minded or expected buyers instantly. This may then eventually evolve to the biggest marketplace for every thing with a secured payment backed by Microsoft. Here, if we think can it be possible, the answer is: yes. If the travel and ticketing get clubbed here just see what a worldwide business will go through Microsoft balance sheet. Conservatively, I can say around $20 billion. Now. I will come all to those areas where a lot of venture capital has put billions of dollars of money like image search, local search, location-based services, etc. All these are going to be used at one application very effectively if Microsoft can bring one product like this. If we add up a few such things, this may rise to around $100 billion easily.

But from where Microsoft will earn or will get the return on investment? In the first place, Microsoft will get a huge addressable market which is profiled as per groups. With a wide range of products and solutions starting from development kits to operating systems to games and content perhaps, Microsoft can achieve a target market of more than one billion users whose behaviours and interests will be available with Microsoft. The problem of Microsoft to avoid piracy will be easily solved when a community-based approach will be there for using applications and licence. Even a group licensing can fetch Microsoft double the business what they are getting at present.

Finally…

To conclude, this is a new phase of Internet and computing history which may see a radical change if Microsoft acquires Yahoo!. Microsoft will double the value what it is today and if we use Windows Office in our PC, we may forget other search engines. If this deal does not go through, even then Microsoft should not give up. Rather, it should develop such a product for users and for their own benefit. The attraction of ad revenue should not be the basis; rather adding the new value should be the target. 

Authored by: Debasish Choudhury Chief Technology and Customer solutions, Telinovation Communication India Pvt. Ltd debasish@telinovation.com