Friday, February 01, 2008
Victim of the Crime
You know, it's not often that we get to witness fatal errors. Strategic errors, sure.
But bona fide fatal - company-killing, firm-vaporizing errors - errors? Almost never - they're the strategic equivalent of meteor strikes.
Lucky us for, the heavens are raining fire today.
I hate to be so blunt, but I'm short of time today, so let me offer a guess: Yahoo + Microsoft isn't just a mistake - it's a double suicide; a fatal error.
Why? Neither company has the DNA to take on Google (let alone the massive number of startups waiting in the wings). Sure, they might collectively have the resources.
But DNA will always constrain YahooSoft from utilizing those resources in ways that create value.
Think Hotmail --> Yahoo Mail writ large. Think delicious --> nowhere. Think Microsoft hardball vs Google softball. Think of the near-total paralysis and groupthink in a YahooSoft boardroom.
The Street is thinking about this nascent industry in terms of "market share". That's shorthand for: "we have no real insight into competitive dynamics".
Competition in this space is - and has been - about edge competencies, redefining brands, and reshaping consumption.
Now look a bit further out. Microsoft is gonna blow it's entire cash pile on this deal.
That's not just a strategic error: it's going to be a fatal error.
Why? Combining bad DNA with bad doesn't yield good. It yields worse.
The challenge facing the media industry - the reason Google blew it's quarter - is to reinvent branding.
Do you think YahooSoft - a combined entity with even less empathy for connected consumption than each alone - really has any hope of doing so?
Not a chance.
I think - for what it's worth - that this is the end of Yahoo as we know it. Fine - the real Yahoo, sadly, suffocated a long time ago.
The real point is: this is the end of Microsoft as we know it. Yes, I know, finally, isn't it nice, etc - more to the point: the endgame will be to leave Google more firmly in the driver's seat than ever before.
I have contacted a few mid level management people at Yahoo who could be described as, ‘Yahoo Purple Lifers”. They have intimated that they will stay and work to make any cultural changes to the organization, and I quote, “as painful as possible for the new Microsoft directors and division Veeps, short of insurrection”.
I’ll try and write something up on this attitude that seems pervasive, on my blog, over the weekend. There has been plenty of bitterness over the layoff’s already.
The cultural clash that shall arise will completely blind side the loafer wearing ops management at Microsoft. They have no idea what these valley people are capable of when they get riled.
Umair - I was looking forward to your summary. Interesting times indeed.
As we were sitting talking this AM....this is what went down!! Interesting timing - a great footnote for my notes of our discussion.
The DNA argument is a strong metaphor and it really is clear in this case what it means. The one thing that I feel sad about is the impact this might have on the activities of the Gates Foundation which is the real benefit that billg has offered to the world. The Foundation is doing a lot of good - and it will be an unfortunate side effect of this double fatality if the Foundation can't afford to keep all of its promises to the developing world!!
On a side note I kinda like MicroHoo instead of Yahoosoft....
Looking forward to following this one with you.
good edge economy article, called "better than free"
Thanks. It does have all the odor of early rot, doesn't it?
Natural selection happens. And evolution follows.
This is the best commentary on the acquisition I've found.
Microhoo (Microwho?) might be a more accurate predictive name if the merger goes through...
How ironical that a company that was on the verge of being broken up for being too big is making a massive acquisition?!
While the DNA, culture clash, value destruction arguments are all valid - I would bet that the story will take at least 5-10 years to play out.
The reality is that MSFT's PC business is such a solid cash generator that it can digest a $45b mistake too.