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

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.