Google Objects To Microsoft & Yahoo Wedding; Microsoft Responds — Irony All Around

Microsoft Yahoo

Not surprisingly, Google’s not happy about Microsoft’s overture to buy Yahoo. The company has blogged an official statement suggesting that the move will hurt what it calls the underlying principles of the internet: "openness and innovation." Microsoft responds to say it is open and that only the shotgun marriage it proposes to Yahoo will make a "credible" number two threat to Google. Statements from both companies are tinged with irony that no doubt many, including myself, will find laughable. A further look and analysis below.

Let’s start with Google. From its post:

The openness of the Internet is what made Google — and Yahoo! — possible. A good idea that users find useful spreads quickly. Businesses can be created around the idea. Users benefit from constant innovation. It’s what makes the Internet such an exciting place.

So Microsoft’s hostile bid for Yahoo! raises troubling questions. This is about more than simply a financial transaction, one company taking over another. It’s about preserving the underlying principles of the Internet: openness and innovation.

Google: As Open As It Wants To Be (i.e., When It’s Convenient) from me back in November covers ways where Google is far from open, ranging from running a proprietary web index, to running its own book search project separate from others, to its black box ad system and more. The openness argument against Microsoft just doesn’t wash when coming from Google.

The statement goes on:

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? In addition, Microsoft plus Yahoo! equals an overwhelming share of instant messaging and web email accounts. And between them, the two companies operate the two most heavily trafficked portals on the Internet. Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors’ email, IM, and web-based services? Policymakers around the world need to ask these questions — and consumers deserve satisfying answers.

This hostile bid was announced on Friday, so there is plenty of time for these questions to be thoroughly addressed. We take Internet openness, choice and innovation seriously. They are the core of our culture. We believe that the interests of Internet users come first — and should come first — as the merits of this proposed acquisition are examined and alternatives explored

If Microsoft were going to dominate the internet in the way it did the PC, it would have done so by now. Yahoo will certainly give it a leg-up in many areas. But again, when Google has spent the past year arguing that it should be able to acquire a player like DoubleClick, it’s hard to see why Microsoft’s past sins are applied to "what could happen." If anything, Google’s been on the "they could do" stick of bad PR for ages, particularly in what Google "could do" in terms of privacy violations. It was never fair to convict Google on things it hadn’t actually done. Neither is it fair to Microsoft, and Google shouldn’t be doing it.

Far better is the argument on instant messaging and email. Back to DoubleClick, Microsoft has spent the past year leading the charge that the purchase would make Google too dominant in online advertising. Arguing that laws should protect dominance now comes from back at Microsoft in terms of email and IM. Perhaps the company will have to spin off those services to gain strength in where it is weak — search and online ads.

From Microsoft:

The combination of Microsoft and Yahoo! will create a more competitive marketplace by establishing a compelling number two competitor for Internet search and online advertising. The alternative scenarios only lead to less competition on the Internet.

Today, Google is the dominant search engine and advertising company on the Web. Google has amassed about 75 percent of paid search revenues worldwide and its share continues to grow. According to published reports, Google currently has more than 65 percent search query share in the U.S. and more than 85 percent in Europe. Microsoft and Yahoo! on the other hand have roughly 30 percent combined in the U.S. and approximately 10 percent combined in Europe.

Microsoft is committed to openness, innovation, and the protection of privacy on the Internet. We believe that the combination of Microsoft and Yahoo! will advance these goals.

With respect, I continue to disagree. We have a compelling number two competitor. It’s called Yahoo. I’m sorry it’s not you, Microsoft — but just because your five year effort to beat Google has yet failed to get you out of being number three doesn’t mean that Yahoo’s not a Google threat.

We know that Yahoo is a strong number two, because we can see that in various markets, significant numbers of people make use of both its search and ad systems. Indeed, Yahoo has a higher share of usage than non-Microsoft operating systems on PCs.

In other words, Microsoft has a 90 percent share of personal computer operating systems. Does this mean that we’re in a scenario that leads to less competition on the desktop? If so, shouldn’t Microsoft be divesting itself of its operating system in order to be so committed to openness and innovation.

As for privacy, thanks for bringing that slam against Google up. Of course, it was Microsoft that handed over records to the US government that Google fought against. Microsoft is already as big a privacy threat as Google, and acquiring Yahoo will only make it more so. If anything, to be committed to privacy, maybe these two crazy kids shouldn’t get together.

Where Microsoft really can argue that Yahoo needs its help is on the application side of Google’s ambitions. Remember Google’s current tag line: "search, ads & apps." Want to see the winners in each category? Let’s look:

  • Search: Google in first, Yahoo in second, Microsoft in third
  • Ads: Google in first, Yahoo in second, Microsoft in third
  • Apps: Microsoft in first, Google in second, Yahoo in third

Yahoo’s fine with search and advertising. It’s in the apps space where Microsoft could help. By apps, I’m talking about things like Microsoft Office, which is making Microsoft billions per quarter. Google continues to build what’s effectively Google Office, which practically no one uses. But I and many others think that will change.

The question is, to fight Google, do you need to fight it on all fronts? Do you need to have a free web analytics program, blogging systems, mapping programs, and much more?

I don’t know. I suspect not. I suspect players will fight and win against Google in particular areas just as other players already do against Microsoft. I suspect Yahoo could continue to be a successful search & ad company on its own, though it might be stronger with Microsoft’s bigger muscle and integration in other areas behind it. Or, Microsoft could make it weaker by fumbling the integration. No one knows how that will play out.

The point is this. When Microsoft talks about it and with Yahoo being a credible number two against Google, forget the arguments that this is about search and ads. Rather, Microsoft sees the combinations as making a credible conglomerate to take on Google Inc., the massive company that has no bounds in terms of where it will go and what it will do. The Big G will seemingly do whatever it wants, something that makes many people nervous. Microsoft is saying if you want something to stop the Google juggernaut as it expands into traditional, settled areas, then it needs Yahoo to fight back.

Expect things to continue playing out this way. Google’s going to play the "hey Internet, Microsoft’s coming to ruin things" card, which is kind of compelling given that both Google and Yahoo are internet companies, born from the web and thriving because they’ve served it. Microsoft will play toward the traditional industries, as it did last year when it accused Google of building a business by stealing the content of others.

For past coverage on the Microsoft proposal from Search Engine Land, see our Microsoft & Yahoo Merger category. For discussion across the web on the Google and Microsoft statements, see here on Blogrunner and here on Techmeme.

Related Topics: Channel: Industry | Google: Business Issues | Google: Critics | Microsoft & Yahoo Search Deal | Microsoft: Business Issues | Yahoo: Business Issues

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About The Author: is a Founding Editor of Search Engine Land. He’s a widely cited authority on search engines and search marketing issues who has covered the space since 1996. Danny also serves as Chief Content Officer for Third Door Media, which publishes Search Engine Land and produces the SMX: Search Marketing Expo conference series. He has a personal blog called Daggle (and keeps his disclosures page there). He can be found on Facebook, Google + and microblogs on Twitter as @dannysullivan.

Connect with the author via: Email | Twitter | Google+ | LinkedIn



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