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Why Microsoft Is Chasing Yahoo 245

latif writes "Microsoft has been chasing Yahoo for quite a while now. Most people think that it all started with Microsoft's acquisition bid for Yahoo, but this is not so. It is well-known that Microsoft and Yahoo have been negotiating since at least May of 2006, and may have been negotiating since 2003. I have done a thorough analysis utilizing information made public over the past five years and my analysis suggests that most people are completely wrong about what Microsoft wants from Yahoo."
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Why Microsoft Is Chasing Yahoo

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  • Comment removed (Score:5, Interesting)

    by account_deleted ( 4530225 ) on Wednesday July 09, 2008 @10:57AM (#24117811)
    Comment removed based on user account deletion
  • by JCSoRocks ( 1142053 ) on Wednesday July 09, 2008 @10:59AM (#24117857)
    Well if I were a second rate, stale, mediocre, and unmotivated employee I might take it upon myself to use some of my free time to eliminate that page from Yahoo's index. Then I'd create my own page saying something similar (or worse) about the author of the story... and I'd make sure it was #1 if you searched for his name. :P
  • by LWATCDR ( 28044 ) on Wednesday July 09, 2008 @11:09AM (#24118021) Homepage Journal

    I think this is a bit unfair.
    I actually like Yahoo.
    I use the home page. I think it is better than the Google version.
    I actually like the directory. Sometimes I like to browse a subject and not do just a search for it. It is real handy when looking for things like towns in a state.
    I think Yahoo has it's strengths as does Google.
    I will admit that I wouldn't use if I didn't have firefox.

  • by rs232 ( 849320 ) on Wednesday July 09, 2008 @11:11AM (#24118057)
    "In July 2001, the US patent office granted Overture US patent number 6,269,361. Also known as the '361 patent, it covered the basic paid-search bid-for-placement advertising model"

    "In July 2003 Yahoo acquired Overture in a mostly stock deal valued at $1.63 billion"

    "The peculiar thing about Microsoft Yahoo negotiations is Microsoft's insistence on owning/co-owning Yahoo's paid-search assets "

    "Microsoft believes that by being clever about the deal terms Microsoft can practically get Yahoo's big fish patent licensee to fully reimburse Microsoft for whatever Microsoft pays for Yahoo's paid search assets"

    "So, who is Yahoo's big fish patent licensee [] .. By simple elimination it has to be Google "


    So basically Microsoft gets Google to finance the Yahoo takeover and then gets Google to pay MS revenue out of its (GOOG) own paid search business.. PURR of EVIL ... :)
  • by morgan_greywolf ( 835522 ) * on Wednesday July 09, 2008 @11:25AM (#24118311) Homepage Journal

    Actually, it makes perfect sense.

    Microsoft instead of proposing a more competitive deal has been busy trying to subvert the Yahoo Google deal by raising antitrust concerns, and even seems to have succeeded at getting the US Department of Justice to [investigate the deal].

    I've been wondering why the Microsoft shills on this site have been the ones protesting the Yahoo/Google deal the most. Now it makes sense.

  • by xbytor ( 215790 ) on Wednesday July 09, 2008 @11:36AM (#24118501) Homepage

    Once you remove the 'hidden material terms' part of the argument, the rest of it mostly falls apart. And I would be very surprised if Google had left themselves potentially open to a charge of fraud of this magnitude.

    Up to that point, it was an interesting read.

  • by scorp1us ( 235526 ) on Wednesday July 09, 2008 @11:51AM (#24118757) Journal

    While I am aware that implementation doesn't have any real bearing on the task at hand, it does affect the culture. Yahoo makes use of open source technologies (as does Google.) Microsoft only uses Microsoft technologies. When they bought Hotmail (and subsequently turned it into a dump) they replaced the BSD boxes with Windows at a ratio of 1 to 5, (5x many windows boxen) in order to support the load.

    Now Microsoft wants to buy search. Given that "search" is basically a text box that returns URLs, and Microsoft already has that capability, one has to look at what is the difference between MS and Yahoo? Why is Yahoo more valuable than Microsoft in paid search? Really, I don't know. But I can guess. Yahoo doesn't care if you're using Microsoft technologies. This has two sides - 1) you get equal support in FF and IE, 2) developers don't have to use Microsoft technologies. The "not invented here" does not apply. It's about getting a job done.

    Buying Yahoo won't fix the problem if Yahoo is forced to change to the MS way. Obviously it's not worked for them.

    I think MS is just buying time if they think they can do what they've always done. Clearly, the decision to buy yahoo search is the brain child of a business man with no appreciation of why things the way they are. If MS is going to buy Yahoo, then they have to admit defeat and not see it as acquiring static property to be added to a portfolio. They have to buy Yahoo then learn why they failed, or better learn why they failed first.

    MS is rife with "not invented here" egoism: IE (Netscape), .Net (Java), SilverLight(Flash), Windows (BSD/Linux), and now Search. I can understand why a company should drink their own cool-aid, but when people start dropping, its time to change the formula.

  • by monxrtr ( 1105563 ) on Wednesday July 09, 2008 @11:56AM (#24118811)

    It only makes sense because Microsoft is floating upon an ocean of patent bubbles. The '361 patent is unenforceable in the real world. But it lets Microsoft get in on the Google paid search game, without possibly setting off a patent Armageddon war meltdown.

    Microsoft's main revenue source (very expensive questionable quality software) is under serious threat. Google main revenue source is not under serious competitive threat. Google would get that '361 patent invalidated in a heart beat if it was a serious threat to their business. Microsoft, however, will not undertake the same tactic to get in on the paid search game, because business method patents are practically synonymous with software function patents.

    Yahoo has nothing. It's no surprise corporate raiders would not take the bait. Any hidden asset value play of the '361 patent is an SCO disaster in waiting. But Yahoo is still in the game, has a chance down the line to be competitive against both Microsoft and Google.

    Such navigation is what Bill Gates considered "good business skills". But MSFT can't afford to pay for the '361 patent chip, and Yahoo can't afford to sell it. And the '361 patent chip is completely worthless in the real world, but billions in stock valuations are being swung around because of it. Maybe Microsoft is just counting on the outcome that Google wouldn't press the patent nuclear war button also (as Microsoft would at least attempt to retaliate against all of Google's on-line services).

    In the meantime, innovation and competition is stagnated, and consumers are worse off paying for lower quality products with higher prices -- ACROSS THE BOARD.

  • by Mongoose Disciple ( 722373 ) on Wednesday July 09, 2008 @12:00PM (#24118857)

    I wish I could mod this post "-1: Wishful Thinking."

    No matter how much you hate Microsoft or boldly state that their business has obviously failed, it doesn't actually make it true. Open Office is causing MS revenue problems? Yeah, right. Let's try to stick to discussing how things are in the world we actually live in.

    As far as this goes:

    At best they can crush and rob Yahoo, but that won't do anything to Google or anyone else who wants to run services with free software.

    If TFA is correct, they could do an awful lot to Google by consuming Yahoo. Not by competing in the marketplace but with the terrible power of patents.

  • by fortyonejb ( 1116789 ) on Wednesday July 09, 2008 @12:05PM (#24118923)
    Random predictions of MS's demise are as old as the day is long. Free software has been the panacea since Windows 1 came about. The folks at MS must know something you don't as I'm sure they've made more money than you. Whether or not you agree with MS, they achieved their goal, make a lot of money. Whats obvious is that you want their game to be over because you disagree with it. Unfortunately no one cares what you want.
  • by sampson7 ( 536545 ) on Wednesday July 09, 2008 @12:22PM (#24119235)

    I'm an attorney tangentially involved in preparing SEC documents for a major corporation. Based on my experience with how seriously companies take their disclosure obligations, I would be shocked if Google were actively engaged in hiding a "material" settlement with Yahoo.

    For what it's worth, materiality is a term of art -- and certainly any royalty paid by Google to Yahoo to settle a patent claim would almost certainly be material, likely and quantifiable -- which would likely trigger Google's obligation to disclose the potential liability in its 10-K and 10-Q.

    Is it possible that Google is playing fast and loose with its securities obligations, or that it has come up with some novel legal theory about why it wouldn't be required to report such a deal? Well, sure. People and companies do stupid things all the time. But is it likely....?

    Wow.... that's a really serious allegation to lodge without any "smoking gun". Interesting article, but I have to think there's an element of conspiracy theorism in it that does not sound credible to me.

  • by speedtux ( 1307149 ) on Wednesday July 09, 2008 @12:45PM (#24119623)

    Microsoft's stock performance has at best been average compared to the NASDAQ during the last 10 years. IBM has actually been a stronger performer. Microsoft's spectacular growth years were between 1995 and 1998.

    Microsoft's 2008 Q1 income sounds kind of impressive (20-25% growth over last year) until one realizes that that is due to exchange rate changes, not new business.

    Microsoft Live has about as much mindshare (search volume) as Yahoo's failed Yahoo 360. Clearly, Microsoft is aiming for the very top somewhere, but not in on-line services. []

    Blogspot alone trounces Microsoft's entire Live effort. []

    Time to look for another job, perhaps? Or can we look forward to another FUD campaign from Steve "200 patents" Ballmer?

  • by LWATCDR ( 28044 ) on Wednesday July 09, 2008 @12:56PM (#24119795) Homepage Journal

    I do tend to agree that Yahoo ads are just annoying.
    Slashdot's ads are also annoying to me.
    I have some rules.
    1. NO POPs I don't care if they are up down over or under.
    2. NO ANIMATION. Motion drives me nuts.
    3. Don't put them in the middle of the text. Off to the side is fine.
    I don't think that Yahoo's are any worse than Slashdot's.

  • by acb ( 2797 ) on Wednesday July 09, 2008 @01:10PM (#24120037) Homepage

    I think MS's designs on Yahoo have to do not with search but with open technologies like YUI [] and popular sites like Flickr. With an acquisition of Yahoo, MS could kill YUI and various other open-source technologies, in a way that it has done before. (In the late 1990s they acquired Bay Area start-up DimensionX, who then made the Liquid Reality Java VRML toolkit. Liquid Reality was buried and the DimensionX developers were moved to MS's ActiveX division.)

    Meanwhile, Flickr (the number 1 photo-sharing website by far) would fit into MS's standard-controlling strategy. Millions of users visit Flickr to share their content and see others' content. If all one's friends and photo-sharing communities are there, that's incentive to not jump ship to a rival site. If Flickr's AJAX/DHTML web site was replaced by a Silverlight application ("enhanced" with some Vista Aeroglass-style effects, of course), all these people would have to install Silverlight. Additionally, Microsoft could drive adoption of their Windows Media still-image standard as a replacement for JPEG, by recoding all the hosted images to WM format and serving it out only as such. All of a sudden, Silverlight is massively more popular, and WM is a major format for photographic still images.

  • by quanticle ( 843097 ) on Wednesday July 09, 2008 @01:34PM (#24120377) Homepage

    Well, as long as we are exchanging anecdotes...

    I used to like Yahoo's mail. It was a pretty simple, basic web based mailbox. It didn't have much AJAX or other dynamic elements, but it was pretty easy to use and it was functional across many browsers.

    Then they replaced it with their Mail 2.0 abomination. Slow, clunky, prone to mysterious errors - it was like GMail's evil twin. After they introduced that atrocity of a UI, I've been using Gmail exclusively.

  • by thetoadwarrior ( 1268702 ) on Wednesday July 09, 2008 @02:00PM (#24120773) Homepage
    Yahoo's messenger and MSN are two of the larger messengers and if MS locks them in together and then tries to tie those users into their other services then it might be a benefit along with MS actually having a search engine someone uses.
  • by Anonymous Coward on Wednesday July 09, 2008 @02:24PM (#24121263)

    I wonder how digital photographers would deal with microsoft lock-in? It seems some goverments at least are aware of the difficulties. Also, since most pro's work in RAW, what are they really gaining by using a microsoft wrapper instead of an open format?

      The only reason I have for visiting _ANY_ microsoft websites is to support Microsoft software. They continue to put the cart before the horse, and the example you're citing is more of the same. If I had to choose between using flickr and upgrading or finding the next best thing, I'd be going to the next best thing. Picassa is available, already works on EeePC's.

    Microsoft continues to chase technologies to shore itself up instead of leading the charege. But now when they attempt vendor lock-in, there are companies stepping up to offer a better alternative.

  • by syphax ( 189065 ) on Wednesday July 09, 2008 @02:58PM (#24121897) Journal

    Benjamin Graham:

    In the short-run, the market is a voting machine;
    In the long-run, the market is a weighing machine.

    He and his student Mr. Buffett have applied this principle (among others) fairly effectively.

  • by drsmithy ( 35869 ) <drsmithy@gmai[ ]om ['l.c' in gap]> on Wednesday July 09, 2008 @03:04PM (#24122033)

    While what you are saying is true,the simple fact is I have NEVER seen hatred for a product like I have for Vista,and that includes WinME. I have been building,selling,repairing and customizing PCs and networks since the days of DOS and Win3.1,but the sheer public hatred for the stink that is Vista is just unreal. I recently built a machine for a customer whose sole requirement was that this machine be upgrading for a long while so he wouldn't have to touch Vista,and this is for a guy who has been happily using WinME for the past 8 years! And when the teenyboppers come in with their parents to have a new machine built and I mention Vista as an option I get a VERY loud EEEEEW!,like I took a crap in front of them or something.

    Dollars to doughnuts that he, along with almost everybody who "hates Vista" has never actually used it.

    So what does MSFT do? Do they do the smart thing and keep XP on the lower end and only sell Vista on machines powerful enough to run it well?

    A machine "powerful enough to run Vista well" *is* the low end. $450 buys you dual cores and 2G RAM, which is more than you need for decent Vista performance.

    When Allchin himself [],who oversaw some of the most profitable years of Windows,says he would buy a Mac rather than take Vista [...]

    That email was written 3 years before Vista was released .

  • Patent shopping? (Score:3, Interesting)

    by rts008 ( 812749 ) on Wednesday July 09, 2008 @03:09PM (#24122127) Journal

    See, that is more along the lines of what I've been thinking also. I think that the search is a significant part of the deal, but not all of it by a long shot-more like icing on the cake.

    Yahoo! has an interesting patent portfolio [] that may be a bigger target than just the search.

    I also have to wonder if MS had anything to do with Carl Icahn stepping into the picture to 'stir the mud puddle' and help push Yahoo! towards MS.

    It will be interesting to see how the dust settles on this one.

  • flawed analysis (Score:3, Interesting)

    by toby ( 759 ) * on Wednesday July 09, 2008 @03:12PM (#24122189) Homepage Journal

    I won't speak for the rest of it, but there's a huge problem, IMHO, with these assertions:

    1. Adobe could have an antitrust complaint against the purchase. - I just can't see what that would be. Anyone?

    2. Buying Yahoo! does very much for Silverlight. How exactly? Silverlight is a threat to Flash by simply existing, because MS *already* has the great inertia of the incumbent monopolist. What has Webmail got to do with pushing Silverlight??

  • by Anonymous Coward on Wednesday July 09, 2008 @04:04PM (#24123211)

    Oh,please,mr Fanboi,Vista is a turkey and you know it.

    Its funny how suddenly you switched from polite to batshit crazy just because somebody disagreed with you. I don't sell Vista, don't stand to make money if microsoft sells more or less, and as far as I know, not a "fanboi". I just call it like I see it.

    The only guys that I have seen that actually like Vista either only use the machine for web surfing or who got monster dual and quad rigs tricked out with tons of RAM and the latest ATI or Nvdia monster card for DX10. Tell you what: why don't you go down to your local best Buy or Wally World,pick up the bottom of the line Vista rig(as that is what the majority of home consumers do,buy on price,which is why Dell has so many cheapy machines) and see how long you can run it before you pull your hair out.

    I have a two year old core duo 1.6ghz laptop that can run vista just fine on 2gb ram. The graphics card cannot handle Aero, but that's OK, Its not very important.

    Talk to your local computer stores,ask THEM how their sales are of Vista VS XP. I can tell you that most of us have quit carrying the thing because it ends up sitting there. When folks come to me for a new machine the LAST thing they want is Vista. And I never said this was anything other than my opinion,but that opinion is based on nearly 2 decades of selling and servicing MSFT products.

    See I think thats a trick question. If I say all new PCs come with vista, somebody will say, "LOLLLL thats because MS killed XP", or something equally inane.

    How many years have YOU been selling and servicing MSFT products?

    0.0 that I know of. Unless I have split personalities, in which case you cant really trust my answer can you?

    blah blah.. I cant sell vista.. blah..

    Dont care.

    AND while I'm at it I need to convince them to throw away most of their peripherals because MSFT boned the driver model and the manufacturers aren't going to bother with Vista drivers for 90% of their hardware?

    Um, So just because a new OS is out the hundred thousand devices should automatically work with it? Just re-read what you wrote and you'll see the dumb logic. Obviously they arent going to, but if there are no OS sales, there will be no drivers, so there will be no OS sales because there are no drivers, and on and on we go. Zzzz.. A kindergarten student could figure that out if given the right analogy.

    MSFT boned the driver model? Thanks for your expert opinion, I'll be sure to forward any driver architecture design queries to you.

    And the gamer customers I've had are sticking with DX9 because Vista simply cuts into their hardware more than they care for.

    Lol, go read some SLI forums, or performance gamer websites. Almost *ALL* of them use Vista. With SP1, the performance is equivalent to XP. All the driver issues have been sorted out by Nvidia and ATI. OK, Not All, but a good chunk of them.

    With a company the size of MSFT,inertia will keep them afloat for awhile. But the whole reason that companies like Intel and Nvidia are getting into the low powered chip market and why MSFT has such a hard on for buying Yahoo is because big and bloated simply won't fly. Why do you think they are offering XP Home instead of Vista Basic on the EEE? Because they couldn't give it away with Vista Basic,that's why.

    WTF has the EEE pc got to do with the Vista OS. EEE pc does not form the majority of the market for vista users. Jeez, how thick is your skull? Obviously they will offer XP, because it has a smaller footprint and MS is greedy, so they dont want to leave a market niche open for OSS. Common Sense 101.. or maybe just 000.

    Written from an iPhone 3G. Un-satisfied with iTunes DRM and iPod lock-in? Get ready to be gouged with a higher service plan!

    Unlike your sig, this is factually true. :)

  • by Toreo asesino ( 951231 ) on Wednesday July 09, 2008 @06:08PM (#24125813) Journal

    This should clear up any queries - []

    In conclusion: More PCs were shipped, anti-piracy was more effective, and like you point out, online services we're "barely significant", but being such a small input into gross profit so far, barely registers either - so worry not, MS jobs are secure for quite some time to come.

  • by Anonymous Coward on Wednesday July 09, 2008 @11:36PM (#24129117)

    Here's why: his name is Mike Moritz.

    Do you really think they're going to pass up the opportunity to let the far more popular Google get sucked dry by a PERCENTAGE license of the '361 patent to Yahoo?

    Yeah. Right. Never.

    Google and Yahoo have had the same backers since day one. Google and all of the revenue and income you seen now is Yahoo tried again and done the right way. The reason Yahoo popped when the bubble popped is because they had not propped up the advertising model properly. Yahoo advertising was driven by the other thousands of crappy dot coms that the same Yahoo backers were funding. Every $1 spent on a stupid Garden.Com or Webvan that ended up going towards Yahoo ad growth translated into $10 of increased Yahoo share price.

    This time around, the ad model that Yahoo had purchased was the only thing holding Google back from being extremely lucrative. So what did they do? Yahoo basically gave it away. Huh?! This article mentions a $30m license -- even $300m looks like a bargain given what Google has gained from it. Anyone with this patent and without an agenda would have made it on a percentage basis.

    If I was a Yahoo shareholder during this period I'd start a shareholder lawsuit to sue the crap out of both companies, frankly.

1 Angstrom: measure of computer anxiety = 1000 nail-bytes