Sunday, February 10, 2008

Begun, the New Internet War Has

The Ancient Chinese strategy manual, "The Art of War" in its opening says, "Warfare is the greatest affair of state, the basis for life and death, the Way to survival or extinction. It must be throughly pondered and analyzed." Many in the business world equate business with war. And if the drama that has been playing out the past few days is evident: war is here. This war is a battle not just for the future of either Microsoft or Yahoo, though those are at stake but of the Internet going forward. 
No one doubts that Yahoo--- with its potential has grossly underperformed and is underwhelming. At the dawn of the Internet age, long before Google was in anyone's radar, Yahoo was the de facto standard.  It was the first place people went--- from front page news to free email, to the groups that it hosts.  
In "All you Yahoos belong to me now!" I wrote about the identity crisis of this once great company and in many respect, still an excellent brand. Its search tech is a distant second to Google. Its advertising system hasn't taken off. Shareholder dissatisfaction aside, with too many vectors for information challenging the attention of users, the only thing that keeps Yahoo going is the brand it has created over the years and its impressive user base, which is analogous to the massive user base of Windows. This New Media company's only value now remains to be the volumes of users it has acquired over the years. 
Is that worth 44 Billion dollars?
The Microsoft argument in acquiring Yahoo is it wants to be a player in advertising. Undoubtedly, search advertising is the biggest money making scheme on the Internet. No, the next one isn't social networking ads--- which hasn't seen the same explosion in revenue as in search. Not that companies shouldn't be in that space, but perhaps they should dial down their expectation largely because the target audience of social networking are young adults and teens. (The next biggest revenue generator of course beyond advertising is the business model popularized by Amazon). And if this argument concerning advertising is to be believed, then this play for Yahoo is because Microsoft wants to acquire Yahoo's user base.
The icing on the cake of course is Microsoft getting their hands on Yahoo's search engine code.  In recent days, Fake Steve for instance highlights the problem with said icing in his Monkey boy's three legged race. Putting Number 2 and Number 3 together, don't make you number one. 
The only conclusion one can draw from this is that Microsoft doesn't have vision going forward. If Microsoft was the Roman Empire, it has been slowed by its sheer size, sheer complexity.  If they really wanted to give the world a heart stopping surprise, how hard could it be to throw a billion dollars into developing the next generation of Windows on top of say--- Linux or BSD?  
Apple dumped their old OS and wrote a new one from scratch a decade ago by developing OS X's proprietary code on top of open source code and did it for less than a Billion dollars, focusing on infrastructure, on future features than wasting time doing it from the ground up. Look where Apple is today, elegant from the code up.
It isn't like Windows apps don't run on Linux today. The fact is, wine, crossover office and transgaming have been running Windows Apps--- games to be exact on linux for years.  Those projects are mature enough to run Warcraft 3 and Photoshop! How hard could it be to polish the existing wine code base, move Windows to a Linux or BSD code-base and still retain the windows look, and functionality that users know on top of that Unix? 
Wine could be what Rosetta is to Apple's OS X. Windows developers wouldn't even be alienated. Mono is .Net that runs on Linux. How hard would the move for .Net developers be?Most of the work has been made.  The argument wouldn't even be Windows versus Linux any more. It would be a Microsoft-approved Linux or BSD desktop/server versus Red Hat, versus Novel, versus Apple. Talk about grabbing market share and giving the competition a bellyache! 
Similarly, Microsoft could have also gone and acquired Trolltech and the QT code base which was recently acquired by Nokia, which would extend their dominance on Linux since KDE, a window user interface that runs on Linux uses QT. More bang for the buck, I would say.
Of course, such moves would be unthinkable for Microsoft. It would rather throw in a Billion dollars rewriting their own code or 44 Billion to buy Yahoo than acquiring another code base and writing on top of that using their own proprietary platform. See, going Unix is the antithesis of everything Microsoft is as an engineering company that says, everything not developed at Redmond is no good.  
Rolling the dice to acquire Yahoo or going after Yahoo in a protracted, and reserve depleting battle is highly dangerous for Microsoft. This isn't a battle for a small company they can just set aside or wait to assimilate or develop a product like zune or xbox that can wait for version 3 or version 4 to be good. They'll lose the ability to waste money on their pet projects and wait for it to grow with this war for Yahoo. 
It isn't that it's impossible to do. Like all marriages that have gone before, not as easy as it would seem. They may find it would be more difficult that they think it would be. This is Yahoo, a huge global spanning business that would distract Microsoft for at least a year and they wouldn't be seeing a return on their investment for at least a year after that.  That advertising revenue must be tempting, not to mention the prestige one gets in being great at Search and Ads makes Microsoft jealous of Google.  
Yahoo is in a similar boat as Microsoft--- innovative-wise, anyway.  In fact, it is safe to say that of the search business that has potential to be the better Yahoo than Yahoo is Mahalo. Both are social-network friendly. In fact, Mahalo is what would be a mashup between Yahoo, CNet, Social Networking and Wikipedia.  
If Yahoo was smart, it should have gone the way of Mahalo, or even acquire them before all this has happened. Just imagine the power all those people answering Yahoo questions, taking advantage of Yahoo's huge user base and apply that to augmenting search results the way Mahalo does.
The Mahalo-way isn't even new. Remember The Open Directory Project, user submitted directory? Mahalo is no different but does it better. Mahalo does the New Media business with not just pointing people to content but generating their own. Nothing like having Veronica Belmont with Mahalo Daily to spice things up. The viral effect of getting users to submit which link is relevant is the antithesis of Google's robotic computer generated result.  If they play their cards right, they could be big one day, if not sooner. The best of Yahoo (not to mention CNet) is already being reincarnated in Mahalo.
Like a thousand other commanders, in myriad battle fields throughout history, Jerry Yang must be feeling what it's like to be on the crosshairs of a more powerful invading army.  Time would tell, if Yang would fall the way of Chamberlain or have the muster to successfully fight off the invaders.  
The good news isn't for Yahoo though. It is for Google. The Battle for Yahoo could severely deplete Microsoft and like the lessons of so many armies, in so many battlefields, wars can be won or lost through the presence or absence of logistics. Whether Microsoft successfully acquires Yahoo or not is really beside the point right now. Google will certainly make sure they will severely give Microsoft a headache to weaken them further and Google doesn't even need to play that hard or for that matter to win. They've already won without even firing a shot and everyone knows it. Throwing a monkey wrench every so often would be great.
The risk is that this War may be the Beginning of the End of Microsoft's supremacy over the Information Technology business and it would go the way of IBM--- not dead, but not Absolute Monarch either. 
When the dust settles, it doesn't matter if Microsoft acquires Yahoo, or Yahoo rejects the bid, and battle it out with Microsoft to win or eventually lose. In either scenario the flag that would fly, would be Google's. It also gives opportunity for Mahalo and others who see the opportunity to quietly acquire users, while the big boys play it out.  Change, the Internet map would be and as Yoda would say, "Begun, the New Internet War Has".