Yahoo!, Google, Microsoft, TechCrunch
Rick Webb
Co-founder, COO : New York
topics: Process, User Experience, Media Planning, Measurement and Analytics, and Automotive
filed under: Internet Culture and Entrepreneurship
I posted this comment over at TechCrunch, but I thought it was worth mentioning here, along with my extended rant:
I suppose it’s irrelevant, but you should probably add “a boatload of Yahoo!’s customers” to the list of people who never wanted a merger. The unspoken plain truth of this crap idea of a merger was always that the products would suffer – and despite the internet zeitgeist of the moment, Yahoo! has solid products, and many are far superior to Microsoft’s.
Never mind that many of these “shareholders” were anything but – options, shorts, and newcomers. I, for one, have owned Yahoo! stock the whole time and never wanted to see such a good company in Microsoft’s hands. Maybe Yang’s lost the plot, but no one ever made a convincing argument Balmer had a plot, and until someone can really do something interesting with Yahoo!, I suspect I speak for the vast majority of its customers would prefer the status quo over a Microsoft deal. And while customers aren’t analysts, shareholders, employees or pundits, they are not irrelevant.
Also, search is not the whole world dude. The heat’s growing in Display, which Yahoo! still trumps Google in. Seems like a smart move to me here – when Google ads make more money for you, run them. Yahoo! finally makes something better, then run those. The whole while you keep your robust, awesome toolset intact (because aside from search and maps, Yahoo!’s are highly competitive to Google’s), and optimize ad revenue from the high-CPM display and custom-ad side. Maybe it won’t change the world but it’s not an idiot business plan and is as solid as most I’ve seen of late.
It never ceases to amaze me how little of a grasp Silicon Valley has on non-search advertising. Yahoo! and MSN, both, reap significant revenue from display advertising, and, more interestingly, the costom, premium-content ads. Google has nothing on them for this. Advertisers pay Yahoo! and MSN millions of dollars for special content sections, video ads, games, contests, etc. And while Google has a license to print money on search, this doesn’t negate the substantial sums these offerings bring these companies. It’s like comparing a highly-efficient get-a-divorce-online company to Bingham McCutcheon.
The valley’s overly-obsessed with “the algorithm.” As far as they’re concerned, money can only be made by companies that have efficient algorithms that do something better than someone else. I can see the source of the obsession – Google is a fascinating beast, and it seems almost magical the way it just keeps making money through the churnings of machines. But it’s not everything, and it never will be. More to the point, the algorithm is almost irrelevant to the needs of marketers. Google happens to be the cheapest cost-per-acquisition right now, besting direct mail and a few other methods, so advertisers use it. But in terms of brand advertising, strategy, emotional relevance and shepherding a brand through the years, it has about as much relevance as direct mail did before it. Yahoo! has always offered advertisers much more in this realm. Even a simple rich media banner ad has an emotional impact in a customer on a level exponentially higher than anything Google can still offer.
Finance has struck me as a parallel here. I remember reading some article in Wired, years ago, about what eventually became known as a type of quants. I was amazed! enthralled! Oh my god! Computers trading! The stock market as we know it will come to an end! Who needs people when the computers can see god in the numbers. Well, that happened and it didn’t. Quants make money. Goldman Sachs makes money. Goldman Sachs makes some money with quants, some money not with quants. GS’s quants may or may not be better than JP Morgan’s or Chase’s. I do not know. They all have them, though. But I do know that the main drivers of their stock prices isn’t the quality of their quants.
As far as I can tell, Google is still a quant. Yahoo! is a Goldman Sachs with a 20% less efficient quant than Google’s. This does not make for a broken company. And if these were Wall Street companies, it would be a no-brainer for Goldman to license a 20% better quant from a competitor, and Wall Street would gamely applaud: well, the sector of Wall Street that pays much attention to quants. I doubt it’d merit a mention in the New York Times.
Google’s made rumblings through the years about launching display advertising, and they’ve definitely built up an increasingly-robust professional-services corps to become more of a consulting thing. I’ve seen some display run, occasionally, on Google of late. But all it does is illustrate how poorly they get it. When they first made such an announcement, I reached out to them and asked to be a partner in it, doing something interesting with it. We were a company not without accomplishment then, yet they still ignored my pleas on behalf of our clients. The press release I read a few weeks ago about their foray into online advertising was a virtual carbon copy of the one I read three years ago.
In any case, though Arrington doesn’t seem to grasp the value of non-CEO humans and services in all of this, SOMEONE must get it. The valley punduits were predicting gloom and doom and levels of 16 or 17 for Yahoo’s stock once the dust settled, yet the dust settled yesterday, and the stock took a massive hit of… 2 and a half points. The “massive shareholder value” loss Arrington goes on about? Around 10%. And while it’s clear Arrington believes that it’ll just get worse, the whole point of a stock price is it’s the market’s belief in what’s happening going forward, so clearly the market does not share his the-end-is-near pessimism.
The fact is, as I’ve said all along, Yahoo! makes good products, has an awesome ad sales service, still innovates internally or through acquisitions (though this is admittedly not as mighty as it used to be), and rules the high-value display and premium content ad markets. Even in search – hell – millions of search engines have existed. Google ruled, but only one even came close to ever challenging them. Yahoo’s not a bad search. Harshing them, while ignoring the thousands of failures elsewhere, is myopic. It’s like constantly harshing Pepsi as irrelevant to coke.
3 comments
A few thoughts in no specific order:
1. I think the two companies are more fundamentally different than you make reference to. At their center, one is based on an ad model of interruption (Yahoo!) while the other is built on relevancy (Google). While there is space for both, they require a very different framework/approach.
2. I don't hear people talk enough about where Yahoo! came from. In my mind they've never been a particularly strategic company. Sure they were successful, but think about their history: They tried to build a big, hierarchical database of all the websites on the internet. That was kind of dumb. From their most of their biggest successes seems to be from taking a page from old media (content, syndication deals, etc.) and acquisition (Overture, Yahoo! mail) ... this isn't to take away from what they've built, just to point out that it's a very different kind of company from Google.
3. I don't know why I feel a need to always add the ! at the end of Yahoo!
4. Is it me or did it seem like Yahoo! had a totally sound acquisition strategy when they bought del.icio.us, flickr and upcoming ... then all of a sudden what seemed like such an obvious road (people powered search) was never released. Was it an integration problem? Vision problem?
Okay. Enough blabbing. Sorry.
And I think you're totally right about Yahoo! and Google being totally different companies. They're not really competitors, and they're not really an either-or proposition.
Will they succeed? Quite possibly.
Will succeeding mean the death of Yahoo or MSFT? Highly Unlikely.