News Ticker

Would A Takeover Of Yahoo Matter?

My reactions have been bouncing back and forth ever since I heard the news early Friday morning that Microsoft wants to devour Yahoo.

Part of me thought that Microsoft was up to its monopolistic tricks again, trying to buy its way into dominating in an area in which it hadn’t succeeded, despite years and billions of dollars of effort through MSN and Windows Live offerings.

But only seconds later my thoughts turned to Google, which is to the Internet as Microsoft is to the desktop – a dominant player.

Perhaps a Microsoft-Yahoo merger would help level the playing field by offering a formidable opponent to Google? After all, Google’s share of the Internet search market is about double that of Microsoft and Yahoo combined.

This is becoming a David vs. David story, as Google quickly played the Microsoft monopoly card this weekend in the form of a blog post from its chief legal officer, David Drummond. He wrote that “Microsoft’s hostile bid for Yahoo! raises troubling questions,” including whether Microsoft will “now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?”

In my mind, the posting backfired on Google. Instead of making me dwell on the obvious concern over Microsoft’s historic predatory practices, I started worrying about how much influence Google might try to wield over the affairs of other companies.

When I read on the Wall Street Journal’s Web site that Google CEO Eric Schmidt called Yahoo’s CEO Jerry Yang to offer Google’s help in Yahoo’s efforts to fight off Microsoft, it became clear that we now have an Internet soap opera with some very powerful forces at work.

But then another thought occurred to me: Perhaps it really doesn’t matter all that much. After all, despite a few new interactive offerings, Yahoo is primarily a “Web 1.0” company, Microsoft is closer to a Web 0.0 company – and Google, though still quite innovative, won’t necessarily be the fountain of tomorrow’s great ideas. Putting it another way, this fight is about the past and the present but not necessarily about the future.

By “Web 2.0,” I’m referring to the interactive Web where users – not big companies – provide most of the content. That’s where the growth has been lately.

Google was already a successful company when MySpace began to attract users to its interactive site. Some people thought that News Corp. was nuts in 2005 when it paid $580 million for the two-year-old property. At the time Fox Interactive bragged that MySpace was “the fifth-ranked Web domain in terms of page views according to comScore Media Metrix” [page views being one of several markers of a site’s success]. Thanks to that acquisition and the success of MySpace, Fox Interactive is now number one in page views according to comScore.

Facebook – an even younger newcomer – is now nipping at MySpace’s heels.

Both these companies offer something that neither Google, Yahoo nor Microsoft have been able to duplicate: a site where people – including millions of young people – want to hang out for hours at a time and contribute their own content.

Google is about helping people find content, and Yahoo and MSN are mostly about posting professionally generated content. Web 2.0 isn’t about any of these big companies. It’s about the millions of people who are creating their own content. It’s also about the youth and young adult markets, which are highly coveted by advertisers and indicative of where things are moving.

Yahoo’s social networking effort, Yahoo 360, hasn’t done well, and so far Google’s Orkut is popular in Brazil and India but not in the U.S. or Europe. Microsoft does own, which is a nice tool for self-anointed pundits, but not a social networking site. [Microsoft’s offerings in the social networking arena are almost anemic.]

I’m not suggesting that this battle is or should be about trying to upstage MySpace and Facebook because, like so many things that are popular today, the social networking landscape too will change over time. Nor am I saying that there isn’t an important role for search, professional content or other offerings that are well within the expertise of Google, Yahoo and Microsoft. But I’m using social networking as an obvious example of a good idea that was not “invented here” (“here” being Microsoft, Yahoo or Google).

The big question is not what will happen to Yahoo or any other existing company but what will be the next Yahoo, Google or Microsoft (or MySpace) and where will that innovation come from? analyst Dave Taylor doesn’t expect much innovation to come from this deal. “Bigger companies innovate by acquiring smaller companies,” he said. “When big companies acquire other big companies, they just gain a larger platform from which they can acquire small, innovative companies.”

While Microsoft and Google have enormous research budgets and even bigger acquisition chests, neither is necessarily going to invent or even be able to acquire the next great thing. They will try and they will probably have some success. Bu the magic of the tech world is that there are lots of creative people thinking up great ideas. One can only guess who the big winner will be. Perhaps it’s one of the hundreds of companies that are about to get venture capital this year, or perhaps it an idea that hasn’t even been thought of yet. Whatever it is, it could come from any number of places aside from Google, Microsoft or Yahoo.

Maybe Microsoft can buy Yahoo or maybe Google can help stop the deal from going through, but you can’t buy or regulate innovation. As Google, Microsoft and Yahoo founders Sergey Brin, Larry Page, Bill Gates, Steve Ballmer, Jerry Yang and David Filo know in their hearts, that comes from dreams and hard work, not acquis