Microsoft - Yahoo First And Then Facebook

Last night I saw a tweet come in on twirl by Robert Scoble about some serious speculation on the importance of the Microsoft Yahoo deal. His post reports that Microsoft will buy Yahoo’s search and then move on to acquire Facebook for $15 to $20 billion.

Reading the first two lines of his post, I quickly messaged Robert and said that, that is an insane amount, irrespective of the market speculation of its value. However, by the time Robert responded, which was pretty quick, because he seemed pretty worked up about the matter. I had finished reading the entire post I realised what a good strategy it is; definitely something I had not expected from the likes of boring Ballmer.

So what are the issues here?

Well Microsoft needs Yahoo and it looks like, after all the flack the Yahoo directors are taking from the shareholders, Yahoo needs Microsoft pretty badly now as well, so I would expect that deal to be progressing quite rapidly and at a more favorable price for Microsoft.

Now the Facebook strategy is quite interesting and harpers back to the Microsoft tradition of locking everyone else out and keeping everything for themselves. Most people are aware of how Facebook locks everything inside the site and does not share any of the data with anyone else, if you are not, go and check out Scobe’s post and see an example. As a further example, Robert posted an update, with this in it:

“Someone on Twitter (Soulhuntre) says that it doesn’t matter as long as HTTP keeps working. That’s just the point. Facebook BLOCKS HTTP if you aren’t logged into its system and it can remove you at a moment’s notice. @irinaslutsky (former employee of mine) was removed last week from Facebook. This is a scary company and if it gets in the hands of Microsoft will create a scary monopoly.”

If Microsoft acquires Facebook, it will have direct and competition free access to 60 million users. It can use the resources of Yahoo search and Google will have no way inside this walled garden.

I am actually impressed with the strategy of this move, if not the outcome; the Yahoo deal was always ho hum, but in light of this, it puts it in perspective and let’s face it, fits with the Microsoft MO.

Robert takes a definite dim view of the future of the Web should this come off and I can see where he is coming from. The way I see it though, is that this will effectively be Microsoft’s last role of the dice as far as being a relevance on the Web.If this all comes to play, one scenario would be to strengthen Microsoft in the short term. It will be able to swell its online coffers more effectively then it is able to do so at present.

One advantage would be an improvement to Facebook, which is in dire need of some major surgery. I could see MIcrosoft actually improving many of the features here for the end user, although maybe not initially.

In making these acquisitions, Microsoft is going to burn a large amount of cash, although even here, this may end up being not too much more then their original Yahoo offer. they will also have to spend more cash to make the necessary improvements to Facebook, so more money gone there, although this will be a drop in the ocean compared to the $40 - $50 billion they are likely to spend on the Yahoo and Facebook purchase.

As I said, I can see where Robert is coming from with his views on this matter, and I agree to some extent, but the way I see it is that, this is something we have no control over, so as much as we may not like it, there is very little we can do about it. Saying this though, all is not negative; people are very transient and will move to the next ‘IN THING’, just as they have done previously. If anything, today’s user wants more openess and less restrictions. The type of practices that Microsoft has used in the past do not translate as well on the Web and this will only become more common as the mobile Web takes off and becomes more mainstream.

Let’s face it, innovation has never been Microsoft’s strength and this strategy may actually restrict them from embracing the next platform as quickly as they should.