Current location:	work
Current mood:	pissed off
Entry tags:	business, news, technology, work

On Yahoo!, Google, and Stupid Punditry

(Yeah, yeah, I work for Yahoo!; but I am not privy to any business decisions relating to Google. This is in response to the current batch of blatherskite on the web.)

Unless you’ve been in a coma for the last few days, you are aware that Yahoo! is allowing Google to buy ads for a fraction of its search results. And you are probably also aware that the blogosphere hates the idea.

They are morons, and your Uncle Wabe will tell you why.

Somebody at Yahoo! had an epiphany — it might have even been Jerry, but I doubt that — that Google and Yahoo! are not involved in some zero-sum game. That epiphany is right: they aren’t.

Apple had a similar revelation, summed up in a classic Jobsian quote: “We have to let go of the notion that for Apple to win, Microsoft has to lose.” Jobs realized that there was no justifiable business reason to compete for low-value markets in which Microsoft dominated.

The deal with Google is a watershed moment for Yahoo!, and it is no wonder why the pundits don’t like it. The bloggers are nothing more than schoolboys huddled in a circle, chanting “Fight! Fight!” at a pair of unwilling participants, neither of whom wish to batter each other for the entertainment of the mob. In the Valley no successful company is to be unchallenged, the health of the smaller business be damned: otherwise there would be no drama, and no drama means no page views. As the Apple Turns closed up shop after Microsoft and Apple became “frienemies.”

Yahoo! had to get out of the search marketing business, because it was not good at it. Yahoo! is not in the business of being a viable competitor to Google; it is in the business of making a profit. A proper business always focuses on its strengths and quickly excises those business units that constantly underperform. Those who complain that Yahoo! invested billions into Panama and therefore should maintain it are simply subscribing to the Prior Investment Fallacy and should have their blogging licenses revoked. Reading Conned Again, Watson! at least should be mandatory before posting.

If it turns out that Yahoo! can make more money outsourcing its search monetization to Google, than what of it? Loss of confidential information? Yahoo!’s search segment is so small, there are few if any trends that can be extracted from it that cannot be done from Google’s massive data stream. Long-term degradation of the customer base? Only if Yahoo! continues to try to sell keyword-based advertising, and if the test is marginally successful that may not happen. Antitrust concerns? The government cannot force Yahoo! to stay in the search advertising market; if they really have problems, then they should break up Google. Just like they could have broken up Microsoft, but didn’t. If the DoJ blocks this, expect to hear serious screaming.

Coexistence trumps conquest; “Embrace. Extend. Extinguish” succumbs to “Accept. Adapt. Achieve.”

So where does this leave Microsoft? Up the proverbial creek. The problem with Microsoft is that over the last few decades they have amassed a (deserved) reputation for treachery and now they are suffering from it. Any potential partner needs only to read a history book to see what partnering with Microsoft is worth; unfortunately, if Microsoft is serious about competing in the keyword-based advertising space it must have partners. Columnists are fond of Microsoft because its rapaciousness made good press; now that everyone is wary, the headlines are far too tame. Tough time for pundits; don’t expect me to weep.