Microsoft, Yahoo, and Google

There’s already been a lot of comment about Microsoft’s recent hostile takeover bid for Yahoo (not least from Google itself).

Google’s objections are based around arguments against Microsoft’s monopoly (hardly a threat when Google’s share of the search market is bigger than Microsoft’s and Yahoo’s combined). David Drummond, Google’s Senior Vice President, asked:

Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC? While the Internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies — and then leverage its dominance into new, adjacent markets.

Could the acquisition of Yahoo! allow Microsoft — despite its legacy of serious legal and regulatory offenses — to extend unfair practices from browsers and operating systems to the Internet?

While I agree with Drummond’s synopsis of Microsoft’s strategy of creating proprietary monopolies I don’t think this is going to be a problem here.

Firstly, Microsoft will certainly pursue this strategy when they already dominate a market, but when faced with competition they can be forced to “play nice”.

Take the rise of Firefox – since Mozilla’s standards-compliant browser gained 20% or so of the market, Microsoft have started building standards-compliance into Internet Explorer. Admittedly, the latest announcement about IE8′s arse-about-face browser versioning metadata shows that their proposed implementation is terrible, but there’s no doubting that IE7 is more standards-compliant than IE6 was, and the news that IE8 passes the Acid2 test is very encouraging indeed.

So, when faced with a significant competitor who are fighting on an “open/standards-compliant” ticket, Microsoft will tow the line.

Secondly, Yahoo’s big problem is that, in order to compete with Google, it needs to become less like Microsoft. If Yahoo is bought by Microsoft then Yahoo will fail – because of all the things that David Drummond mentions. And most fundamentally, as Umair Haque says:

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.

Bill Gates might be thinking that if he buys Yahoo then he can add their 20% of the search market to Microsoft’s 12% to make a combined 32% against Google’s 54% share, but given a Microsoftization of Yahoo, the chances are that Yahoo’s users will jump ship to Google, giving Google a worrying 74% market share.

I say “worrying” because, while I really like some of the things Google have done, that doesn’t mean that I want them in a position of unquestionable dominance. At the moment they are undoubtedly the largest search engine, but Yahoo are still a visible competitor – an alternative if I want one (particularly for APIs).

Finally it would be a shame to see Yahoo subsumed by Microsoft. I don’t want to log into Flickr with a Microsoft Passport or Windows Live ID (which would surely be the result of a takeover).

While Yahoo are still struggling behind Google, they are doing some good stuff. Their online applications such as Flickr are good, and they actually engage with the web community (they put on good presentations at d.Construct 2006 and @media 2006 in London).

I think all that would end if they were bought by Microsoft.