I have just finished reading an article in Fortune's February 18th edition saying the merger will be failure and comparing it to the AOL Time-Warner deal. I have seen lots of articles out there about why this deal is going to be difficult and I agree with a lot of them but the AOL Time-Warner deal is a rotten metaphor.
That deal was about the triumph of the Internet over Brick and Mortar. It was about a company bringing internet savvy to a an old business that was being left behind because it didn't get the new business paradigm. This deal is about two competitors trying to catch-up in Web 2.0. It's about size and catching up, not learning a new paradigm.
That deal had the David (with a Goliath stock) taking over the Goliath. There is no David in this deal. The challenges faced in that deal came from David not being able to control the Goliath and now the talk is about the Goliath seprating itself from the David. After all, one of the biggest differences is that AOL was the buyer.
Related Stories: | Topics:Technology, Management, AOL LLC, Time Warner Inc., Business, Science and Technology, Technology |
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Recent Comments | 2 Total
February 24, 2008 at 2:07pm by Edward Sussman
I tend to agree. I think the general malignment of this deal underestimates Microsoft's prowess. The Yahoo audience is still enormous. And Microsoft has very big suite of online apps, such as Office Live, for which they need to establish market share before Google eats their lunch. The intergration of Yahoo and Microsoft's ASP apps is potentially very powerful.
February 25, 2008 at 4:19pm by Joel Scoble
I don't agree that it's about two competitors trying to catch up to web 2.0. Depending on how you define web 2.0, both Yahoo and Microsoft have been in that space for a long time, at least in the social web space. Yahoo groups anyone? Microsoft also in MSN. Both companies also own or are investors other 'Web 2.0' companies. Flickr for Yahoo and Microsofts recent investment in Facebook are two of the more prominent examples.
Microsoft was also the first company to use AJAX like technologies with Outlook's web access. They just didn't come up with a catchy name for it and publicise it like Adaptive Path did. Maybe because they didn't need to market their orgnaization like Adaptive Path did?
This is really about search and advertising. Microsoft has been spending a lot of money, along with leveraging it's IE product, to expand it's market share in the search engine sector and it keeps falling further behind. If Microsoft were to successfully acquire Yahoo, it would have a significant minority share of searches.
But advertising is where the revenue is and Microsoft has been working hard at expanding this. The acquisition of Yahoo would improve its offerings on this front and allow it to be more competitive with the current king of on-line advertising: Google.
The AOL/Time Warner merger? That was just stupid, as history proved. It would have been like merging with Compuserve in the early 90s. The technology marketplace and competitors had already passed it by.
One of the reasons why this deal has been maligned is that in the tech world, acquisitions are often made for the technical expertise within that company. Yahoo is full of Microsoft haters and there is a good chance of brain drain once it occurs. Losing accounting, hr and that kind of personel is significantly different than losing the software engineers and programmers that make technology companies work.