11 julio 2008

Yahoo - Microsoft marriage

As most of you might already know, Microsoft tried to buy Yahoo! some months ago without success, at that point Yahoo's CEO, namely Jerry Yang, considered bid too low for the value of the company. It was said negotiations were closed but, honestly, everybody thought tale was not finished at all. After a short while, Microsoft changed its offer to bid only for search and advertisement businesses where its weaknesses are more apparent and more value can be added to Microsoft. There is guy, Carl Icanh, who is trying to facilitate negotiations and would possibly take a good position in the after-deal-with-Microsoft Yahoo company.

First of all, I must admit I am not aware of the details of the negotiations so take my opinion as the one of an internet user, probably an experienced and thoughtful user but an anonymous user at the end of the day ... anyway, take this as you prefer.

Why Microsoft and Yahoo are negotiating ?
Microsoft is leader in PC licensed software and Yahoo is relatively well positioned as a content broker portal and at first sight, they both are huge corporations with an enormous value in stock markets and with quite healthy businesses in the software and internet markets so, why don't they simply try to stay where they are? Answer is very simple, answer is Google, they are "afraid" of Google.

Google moved the battle field where they are the strongest, that is the most likely successful strategy when competitors are, overall, stronger than you but you have some niche where you would defeat them. If you are smart enough and have such ability, you must move the fight to your niche. Google did it, or more precisely, all of us did it along with them.

At the moment, not many of us think the future is on building faster and better performing PCs, computing process power has been displaced from your PC or laptop to some remote locations where thousand of computers serve million of users. This morning, I read Samsung is about to launch a laptop without hard disk at all. In that scenario local computing devices are becoming a just commodity, no more than a paired keyboard and screen with internet access capabilities.
On the other hand, open source software is moving fast and competing evenly to proprietary software ... but I will leave it to a good friend and also author of this blog, who will elaborate that further.

Question is, how do you think Microsoft sees itself in the long term, let's say in 3 or 4 years time?
My take is they see worse than now, they are leaders in PCs but focus of users is moving where they are weak, to the internet and remote processing. General perception, sorry if you thing differently, is that Microsoft keeps trying to make us pay for a bad product, keeps trying to make money out of something Linux can offer for free and so son. And I think perception of users is everything in a fast growing market like internet.

Advertisement business of Google.

Advertisement is the other market where Google is defeating competition. And here, Google Guys thought again there is a different, a probably better, way of managing business, and they launched AdWords with a huge success. The so called "sponsored links" on the right hand side of the search results page are linked to the keywords the user entered in the search field, if you search for flight, you will get sponsored links of some important airlines. But, what are airlines appearing in that box and which will the one on top of the side box? Well, here is when the innovation of Google kicked twice.
Firstly, for every keyword, like "flight", there is an on-going auction for all customers /advertisers, if Iberia thinks "flight" keyword is worth one dollar per click and they are within the best bidders, their website will be shown at the side box every time a user searches for the mentioned keyword.
So far, Google would look like any other company concerned on making as much money as possible, which wouldn't be surprising, but here is where second innovation comes. There is room for more than one advertiser in the side box and the criteria to select who is on top of the sponsored links box is just popularity, the one that is clicked most often by the users will be shown on top, meaning it has higher probability to be clicked by the next user.

They are thinking on making money as any other private company but they always leave some space for letting the user to be on command. They could have also opened auction for the first, second, third and so on places of the sponsored links box with greater benefits but they didn't do that way.
User's perception is Google search is reliable and even advertisers are sorted based on user's preferences and Google Guys become, again, the Good Guys.
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