Feb 1, 2008

MSFT + YHOO - What's next?

Many of my colleagues (links below) have commented on the news that Microsoft has made a bid for Yahoo. So here's a bit of what I think...

For now, this is a battle in the consumer area more than the enterprise (for now). When I was researching a report on next generation e-mail last fall I was impressed by a November 20, 2007 Reuters article regarding the "10, 20, 30, 40" plan that Kevin Johnson, VP of Microsoft's platforms and services division, laid out at a UBS investors convention last November.

The plan, which represents Microsoft's aspirations over the next three to five years, calls on Microsoft to increase the company's share in Web search, page views, percentage of time on the Internet and percentage of advertising dollars.

The current market is The plan would execute as follows:

Microsoft wants its Web sites like MSN.com and Windows Live e-mail to comprise 10 percent of all Internet page views from about 6 percent now...

...Microsoft also wants to boost the percentage of minutes spent at company Web sites, out of total time spent on the Internet, to 20 percent from about 17 percent...

...Microsoft's plan is to raise its share in online search to 30 percent. Research firm comScore said Microsoft's search market share was about 10 percent in September.

Microsoft aims to capture 40 percent of all dollars coming through digital advertising platforms compared with around 6 percent now.

The current global online advertising market, estimated at $40 billion, is held by Google and Yahoo. Consider this, Microsoft acquired digital advertising firm aQuantive for $6 billion (85% price premium) last August. They also announced plans to acquire FAST in January 2008 for approximately $1.2 billion. Add $44.6 billion for Yahoo (a 62% price premium). It's a lot of money but combined Microsoft has a tidy package that puts it on the path to "10, 20, 30, 40." With such ambitious plans Microsoft will need all the other benefits that it gets from Yahoo, including data centers, a robust web services infrastructure, social software, and more.

What struck me is the article only mentions Microsoft's consumer online offerings, MSN and Windows Live e-mail. There is a distinction when it comes to consumer vs enterprise markets, but the lines are beginning to blur. The challenge for Microsoft is leverage its assets so it consistently supports both markets.

As far as the future of Yahoo this is still a bid - a good one - but a bid no less. I am not expecting to hear anything about who's leaving or what might happen to the brand until the deal is in place. That may take some thrashing and I expect some scrutiny before we know what will happen. So stay tuned.

For additional reading take a look at some of what my coworkers have to say:

Mike Gotta - Peter O'Kelly - Craig Roth - Guy Creese

1 comment:

Dan said...

They do get Zimbra....and all the Lotusphere photos on Flickr.