Tuesday, February 05, 2008

Ad Serving Software - Google, yahoo, & poor MSN

The Microsoft attempt to buy Yahoo amazes me. I think it's a hail mary desperation play which is unlikely to succeed. Can Microsoft really think that this is their best chance for a winning strategy? Apparently yes. I'm stunned.

The heart of google's economics today is that advertisers pay google for clicks on small text ads to be placed in an appropriate context (next to search results, on web pages, next to emails etc). It's real simple and has fueled the growth of the best company of our era. Google rules, they are number one. They are expanding in many directions with incredible technology and vision. And behind, there's the adwords/adsense (and double click) technology. The haiku like text ad.

Yahoo has failed to implement a successful system for this mechanism. The yahoo systems stink. I've tried to use them (the real old one, the newer ones) and I can report first hand, they stink. Microsoft has a system that we use too. It's not that big a deal in our business so I haven't really noticed whether it's any good. Could Microsoft think that their system is so good that they are looking for new places to place ads so they think they can make yahoo alot more profitable?

If that was true, why wouldn't they buy a bunch of portals and websites? They could buy the bellsouth portal, the att portal, about.com, and many many others and save themselves billions. So it can't be that simple.

Does Microsoft want the yahoo search technology? The yahoo portal? Since most of what yahoo has, microsoft also has, I see integration problems going on for a long time. Yahoo mail vs hotmail? MSN search vs Yahoo search? MSN homepage vs Yahoo portal? I can't imagine a worse job than being involved in those integration issues. I wouldn't like doing the policy work or the implementation. Awful boring work in which years of people's effort has to be trashed on the alter of economies of scale and reduction of redundancies... Microsoft must know all this and know that these organizations, built around brilliant engineers who like to DO, are not going to fin the next few years to be much fun. Will many of them quit? Of course. Unfortunately, it'll be the best ones who move on. Microsoft must know this. This isn't like integrating airlines where you end up with more routes or retailers where you have more stores or manufacturing where you have more products. This is technology and online brands

Here's my bottom line. Microsoft is betting the farm. They aren't buying some cool technology, they aren't buying into a new industry (cell phones, databases, publishing,). They're buying their number 2 competitor which is going to be a apinful integration. They must be doing it since they feel that they are going to be slaughtered in their homefield and this was their best chance to stay near the top. I'm amazed

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