While we stopped writing about the day to day exploits of Microsoft and Yahoo! a bit ago, now that it appears to be coming to an end we can’t help but make a few observations. When Microsoft first approached Yahoo! about some kind of deal, back in January 2007, the idea of a rapid advance in search share seemed obvious and advantageous. Since then, Microsoft both wearied of dealing with Yahoo! and probably learned quite a bit about the motivations, and the weaknesses of the company it pursued. From the moment Microsoft made a public offer for Yahoo!, on February 1 of this year, nothing about the way that Yahoo! responded could have come as much of a surprise to Microsoft. They’d been witnessing the same kind of action for more than a year behind closed doors.
Make no mistake, finding weaknesses, and then going for the throat, is what Microsoft does best. As an evil empire, they’re damn good at what they do.
So take a look at what’s transpired since February. Yahoo! is a shambles. Microsoft has begun to fire the first volleys in its assault on “the ten blue lines”, with a stated purpose of “disrupting” in search. Google finds itself, while decidedly in a strengthened position, all of a sudden with the eyes of the Department of Justice upon them.
Jerry Yang and David Filo were shocked when Microsoft pulled back from the table, but was it an admission of defeat by Microsoft, or a calculated move to “disrupt” in a lot more ways than just rolling out a cashback program? Did Microsoft lead Yahoo! up to the precipice and then give them a swift kick in the behind? Microsoft walked away from the deal, and truthfully if anything it was a relief to shareholders, partners, and employees. They came out of it with no damage done. If they could have pulled off a deal that made sense, at a price that made sense, they would have done so. By pulling out, they may have dealt a fatal blow to Yahoo!, set Google up for a monopoly battle that might, with any luck, get ugly quickly, and certainly have left the search game with more uncertainty (and more opportunity for Microsoft) than there was before the offer was made.
Over and over, word from within Microsoft is that “we’re in search for the long haul”, and “this game is just beginning”. Microsoft isn’t going to win in search this year, or next. Beating Yahoo! down isn’t going to guarantee Microsoft anything, and may indeed make Google even more powerful than before. But it’s a shot, an opening that wasn’t there before. Will the disruption they’ve caused by pursuing, and then spurning Yahoo! reveal some chinks in the Google armor? Will Google be ready to withstand an assault by the DOJ, with Microsoft pulling every string they have available behind the scenes to spur them on? Expect Microsoft to be more than ready to exploit every weakness, to get down and dirty, to pull out its formidable bag of tricks. Microsoft didn’t lose much by not buying Yahoo!, but what did they gain? Time will tell.