June 28, 2008

Yahoo Was Right to Turn Down Microsoft Offer


It hasn't been a banner year for Yahoo. It started off with an unsolicited acquisition bid for billions of dollars by the Internet's biggest villain, Microsoft, then was followed by some of the company's smartest talent abandoning ship en masse.

Despite what the market may suggest, Yahoo was wise to reject the Microsoft offer. Microsoft's interest in Yahoo was, for the most part, to acquire its market share in search and online advertising - a segment currently dominated by Google.

Microsoft, unfortunately, still sees Yahoo for what it was during its adolescence: a search company. Through acquisitions and internal development, Yahoo has outgrown its roots and is becoming more a content company than a competitor to Google.

Unlike Google, Yahoo's sports and news sites are full of original content from a host of writers. The sports site in particular has been nipping at the heels of ESPN.com in recent months with key writer acquisitions and breaking news stories.

Beyond the homegrown sports site, Yahoo has excelled at acquiring popular, name-brand content services. One of the early acquisitions of the Web 2.0 era was of delicious.com. Delicious is a social bookmarking site that is used around the world to share interesting sites with friends and colleagues.

In 2005, Yahoo acquired photo sharing site Flickr - a groundbreaking photography site with sharing and interactivity features. Beyond just putting photos

you snapped online for others to see, Flickr allowed users to comment, annotate and share the photos via their personal weblogs. This integration helped solidify Flickr's place as the dominant photography site for amateurs and professionals alike.

There is little doubt that Yahoo is great at building communities. With such a far-reaching set of content sites under its umbrella, it is unimaginable how Microsoft or any other suitor would be able to embrace these established communities in the same way Yahoo has in the past.

Microsoft's acquisition of Yahoo is akin to taking the drumstick, your favorite piece of the chicken, and then throwing out the rest because it's not really tasty to you. You're interested only in ensuring that your archrival doesn't get the drumstick before you do.

Companies evolve over time. If they don't, they become the next Altavista: irrelevant.

Rather than trying to stay relevant in a market where you've been outdone (search and advertising), focus on where you are excelling above and beyond your competition, and smile each month as you deposit Google's advertising check.

Justin Williams is a local blogger and the owner of Second Gear, a local Web and software development firm. Readers may send him e- mail at [email protected]

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