Microsoft has officially dropped it’s bid to buy Yahoo. It took quite a long time for Microsoft to see the light and it may only have been Yahoo holding out for a higher price that finally killed the deal.

I was quite skeptical that this deal wood be good for Microsoft or Yahoo, and believe the major beneficiary of it would have been Google. Neither Microsoft or Yahoo has a product that effectively competes with Google’s search and advertising products. Combining two huge computer systems or choosing between the two would have tied them up in knots for years.

Yahoo has some great potential if they can truly integrate their social assets and open them up as a new type of application platform. Perhaps the Microsoft bid was the spur that Yahoo needed to get it’s act together.

Yahoo’s shares will drop on Monday and Yahoo will be sued by shareholders who are frustrated by their inability to close a deal. It will be interesting to see if Yahoo continues to pursue the Google deal and if Microsoft emerges as competition for an AOL deal.

If Yahoo doesn’t take this chance and start delivering performance, then Microsoft or someone else will be back and buy them for much less than the $37 per share Yahoo wanted to agree to the deal.

Technorati Tags: Microsoft, Yahoo

Yahoo’s CTO Ari Balogh opened his speech at Web 2.0 Expo speaking about about 3 big bets: being the most important starting point for the web, being a must buy advertising property and being open.

He says that Yahoo has been open for a long time. They have lots of open API’s. Flickr is the second largest of these.

He wants to take “open” to a whole new place. He wants to open up all the assets to developers. They want to open up the social network that is Yahoo. It sounds like they have been learning from Facebook and OpenSocial. They seem to recognize that they have the ability to be the worlds largest social platform if they can get this right.

He announced the opening of the beta for search monkey. He says that Yahoo’s open strategy is not just about opening up the search page, but opening up all the aspects of Yahoo.

They will have an application platform and a social platform. They are going to unify profiles across Yahoo go make social possible. The third element is to re-wire all the properties of Yahoo so that there is a consistent API across the different experiences.

They want to rewire the entire Yahoo experience to be social. They don’t view social as a destination. He provides an example of social being used to highlight mail in email system, highlight what’s important to friends in My Yahoo or on the sports page.

Y! OS (open strategy)

• Rewiring Yahoo
• Open Yahoo to developers like never before
• Making Yahoo more social
• Making Yahoo portable.

Search Monkey now, much more later this year. The overall process will unfold over time. Look for releases over this year and next.

UPDATE: Here’s the video of the presentation:

Technorati Tags: Yahoo, Open Strategy, Web20Expo

Yahoo told Microsoft to pony up a few more bucks if they really want the deal to go through. I hope for both Yahoo and MS that MS gets a clue. Microsoft has been hit hard in the market since the Yahoo bid with it’s stock down from $32 to $28 which is about a $30 Billion drop. The street is smart enough to know this deal is a bad deal, I hope MS gets the message. Although if I was some big fund with a bunch of Yahoo stock I’d be pushing hard for a sale, so Yahoo better get a clue about what it needs to do to stay independent. If these guys don’t get a clue Google will clean up big time.

If Yahoo wants to survive here are five things that would make some sense:

1) Either announce some grand social strategy that takes advantage of things like flickr or announce that that all these money losers are up for sale/spin off/close down.

2) Start thinking of advertisers as customers and make employees understand they are at Yahoo to make $$ for shareholders.

3) Hire someone who knows how to manage a sales force for sell through. Yahoo has way too much remnant inventory and sell through will all drop to the bottom line and be good.

4) Decide it’s ok to be a really successful media company and get rid of the Google envy.

5) Fire the Panama team and announce that they will partner with best bidder.

Technorati Tags: Yahoo, Microsoft

The folks at Google must be smiling tonight. Microsoft has been lured into putting a bid in for Yahoo. This is a waste of time, money and energy by Microsoft and that should make the Google folks more confident that they are on their way to overtaking Microsoft in the battle for leading technology company on the planet.

Combining two companies that DO NOT GET IT is NOT a recipe for competing with one that does. So let me get specific about what I mean by NOT GETTING IT as it relates to Microsoft and Yahoo. Anyone who has used Google Adwords as an advertiser and Google Adsense as a publisher and done the tests on the competitive products from Microsoft and Yahoo knows what I’m about to describe.

When I set up a campaign at Google Adwords, it is an automated process that is rich with interaction and feedback. I can test a campaign, keywords and ads in a very responsive manner that allows me to set it up, test it and optimize it quickly. Yahoo’s equivalent service was a captive to the belief that permeated Overture/Goto that only human editors could screen ads to make sure that they were relevant. It would take days under that process to do what Google did in minutes As a result, I advertise at Google and do so with Yahoo when I get around to it, if ever. (BTW I told this to the senior team at Yahoo’s search marketing group, but they either didn’t want to hear it or could not change the business process that had been set in place 4-5 years before) Since then, Yahoo has tried to reinvent its ad platform and Microsoft has launched their own version, but both still lag way, way behind Google.

How will Microsoft be able to merge two hugely expensive computer platforms when neither is yet good enough to compete with Google’s ad platform? And the same problem exists when you look at it from the publisher side. Google’s Adsense delivers better ads than does the equivalent Yahoo product despite huge investment by Yahoo. What will Microsoft do, scrap one deficient set of systems for another or try to make both work? Either way, the path leads to doom and gloom for both Microsoft and Yahoo.

There is obviously much more to both Microsoft and Yahoo than search and search advertising, but let’s be clear. Search based advertising is the engine that powers Google and everything it does. Social networking/media, a la MySpace and Facebook, has huge potential and Yahoo should have been the king of that domain given all their acquisitions in that arena over the years, but if Yahoo can’t turn My Yahoo, Flickr, GeoCities, De.licio.us etc. into a Social Media powerhouse how can we expect Microsoft to do so.

I can only hope Yahoo turns down Microsoft and they come to their senses. Yahoo can still do great things with the audience and assets it owns by changing its focus to become the queen of social, instead of the king of search. Microsoft should stop listening to bankers and get back to making products that work well and can out perform the competition.

Technorati Tags: Yahoo, Microsoft, Google, social networking, social media, search