Microsoft Smells Blood in the Water goes after Yahoo!

Microsoft clearly smelt blood in the water in the Yahoo! deal with the recent poor earnings, the lagging stock price, and the announcement that it was laying off employees added up to an all out attack.

My initial reaction to the Microsoft making an offer for Yahoo! was like many..Hmmm..why? In my mind there are some potential pitfalls here and just joining talent forces won't let you make headway on the industry leader, as Ballmer likes to call, Google. 

I first want to say this signals a new focus for the company as a whole, you just don't spend 45 Billion dollars on a whim. Does this mean they will alienate what got them here in the Windows and Office division, No of course not, but it sure signals a change in the core values at the company. In my mind it also speaks to the influence that Ray Ozzie is now having on the top echelon of folks in the company. Good or bad, here we go...and it might get bumpy.

As Long and I put together this morning there are a lots of service that overlap between the two companies.

Lets talk Search First, Yahoo has a pretty good chunk of the search market share today, and Microsoft is a distant third.  The two together still wont touch Google and it continues to suck search share over time from the two.  By combining Microsoft believes that they will have better, deeper, engineering pool and with more folks working on this they can staying competitive and even make some headway.

My thought on this are that Microsoft won't get that much deep talent from the acquisition. Yahoo! is a bay area based company and as such not many would be willing to leave the gloriousness that is that region for the gloom and rain of the Seattle. I think you will see Google end up getting to cherry pick the talent it wants out of the Yahoo! pool by offering a very good signing bonus.

The other thing this signifies is that Microsoft is willing to spend 45 billion in the existing search game and not willing to invest in what some are calling the new search game which many believe will be with a social aspect to it.

Advertising is obviously another big part of the Yahoo! play they are trying to make headway against Google and Yahoo has a decent position in this space as well.  This might be the area that makes the most benefit for Microsoft, but is it worth the 45 Billion...Not in my mind.

Now for all these service you can't keep both running, over time you will have to phase out one or both.  How do you select one and not tick off users of the other service?  Do you take a best of bread approach?  I think I would...Would you kill off Flikr for the sake of your own photo service?  Will you retain the product with the best brand recognition?

What are your thoughts...good, bad, indifferent on this deal?

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