Why Yahoo+Microsoft will help Google

Three reasons:

1) Google gets the best and the brightest from Yahoo. Why? Compensation. Microsoft, in a titanic mistake, eliminated stock options as an employee incentive early in the decade, replacing them with  much less lucrative and leveraged restricted stock. If you're a hot programmer at Yahoo, you'll get options at Google -- not at Microsoft. Aside from compensation, Google's culture, speed, lack of bureaucracy, location, lack of legacy will be big attractors of talent.

2) The confusion factor. Microsoft has never acquired or absorbed anything as large as Yahoo -- unlike Cisco it has no culture or processes around large-scale integration. Microsoft's tight programming ethic will be naturally suspicious of Yahoo and its culture of media and advertising. When the inevitable integration plans are drafted, MSN and the search gurus at Microsoft will defend turf. In a market defined by a quick pace, Microsoft will take years to get this integration right.

3) Governmental entanglement. Google knows how sensitized Microsoft is to government intervention in its business. That's why the company is lobbying in Washington for oversight and review -- a strategy that will place Microsoft back in the hands of regulators. Google probably won't stop the deal, but it will throw sand in the gears and prolong the process. In a war being fought at high speed, those few lost months could prove to be precious.

Comments

re: Why Yahoo+Microsoft will help Google

I think the salient point in your #2 reason is not about the large-scale integration, but culture. Cisco has, is, and will always be a culture of change. It is an element of great pride for John Chambers. Microsoft is culture-change resistant. Technology change good, but not culture. This has cost Microsoft many good people over the years, those who wanted to see shifting and didn't. Google is more like Cisco's culture, which should result in good talent from the disenfranchised Yahoo employees.

re: Why Yahoo+Microsoft will help Google

In this fight, Google's open culture will be an important weapon against the more insular Microsoft.

re: Why Yahoo+Microsoft will help Google

Why is it so confusing to so many of the larger companies that good employees want to have a vested interest in the success of the company?The list of "Best Companies to Work For" every year always includes companies that understand that Corporate Culture, feeling as though the company's success is tied to one's performance, and feeling valued as a person - not just a position - are 3 key elements to a happy workforce.

re: Why Yahoo+Microsoft will help Google

George -- This might be the best short take I've seen on the subject. Yahoo had big enough hurdles facing Google head-to-head and overcoming its various internal issues. Microsoft has created huge hurdles for itself by taking on an acquisition this big, and by taking on Yahoo's problems in particular. And, as you rightly point out, all of that's in play *before* you get to the part where Google helps the feds slow the whole thing down.Any predictions on when the first "synergistic" product ships from Microhoo? I'm not optimistic.

re: Why Yahoo+Microsoft will help Google

Gates' refusal to up the offer could indicate Microsoft's recognition that this deal is a bridge too far. Visions of messy integration, internecine warfare, cultural disonance, and months of wasted time sorting goats from sheep may be causing Microsoft pause. Good move on the company's part.