Here’s a Dumb Idea: Sell Yahoo! to Microsoft

The rumor mills are going crazy with the news that Microsoft might buy Yahoo!. Depending on how you measure Yahoo!’s valuation based on its last year of poor results, it’s probably a great time to buy Yahoo!. Unfortunately, Microsoft is probably the worst possible buyer. The entire reason for this is summarized in two points:

  1. Microsoft web division employees be demoralized
  2. Top Yahoo! employees in general would be leave

Pretend you just spent the last three years of your life trying to build a reputable Internet division. You got the IE division to default to You got the Office division to work with you on a new Live product offering. You convinced someone up high that Hotmail needed to use AJAX and up the capacity limits. You even copied Google’s map, local, search, advertising, and images searches. Three years, wasted. And to make matters worse, your job is at risk since there’s a bunch of Yahoo! folks who do exactly what you do, possibly better.

But what’s worse is the fall out of Yahoo! employees. Yahoo! has been making big steps in recent years in producing open, free (as in speech) APIs for the web. They have been a friend to the open source world. In summary, this is a the culture at Yahoo!. Microsoft represents the very opposite developer culture of Yahoo!.

This is because Yahoo!, unlike Microsoft, likes things like open web standards that decrease their costs and development time. They prefer information exchange and open collaboration since they use and appreciate the open source model. In all honesty, they probably hate IE as much as any other web developer for its absolutely horrible web standards support (makes it really hard to make cool web pages). Microsoft, on the other hand, sees the entire web as a threat to its Office and operating system monopoly. Thus, Microsoft sticks to its proprietary guns in an effort to keep the web standards splintered. By keeping web standards in limbo, they are able to keep the web “IE vs everybody else”, A.K.A., “Buy Microsoft or get screwed.” Many of their web properties have only mediocre support for non-IE browsers – a direct result of this closed source culture.

This is a direct clash of interests and, consequently, employee culture. Of course, in any buyout, you will always have people cashing out, but what I’m speculating here is a general demoralization of employees on both ends. But when Yahoo!’s top minds leave, where do you think they are going to go? Straight to Google.

This would be beyond dumb. For $50 Billion, this is suicidal. Microsoft would be shooting itself in the face, and Google would be picking up the insurance money. They would incur huge overhead in integrating Yahoo!’s operations, giving significant advantages to Google while Microsoft tries to get its vision unified. And in a time when both Yahoo! and Microsoft are bleeding market share to Google, is the investment even sound? Microsoft might be big, but they aren’t big enough not to feel a $50 Billion purchase that doesn’t pan out.

Something I’ve come to realize is that a company is about the people in it. If all of the employees left a company, the company is worth practically nothing. Yahoo!’s talent is what keeps it consistently #2. When those people bleed over to Google, we can expect Google to pull even further ahead and Yahoo! to keep slipping.