If you are a 'Web 2.0' watcher by now you've seen the hubbub over the Peanut Butter Manifesto memo which is an Yahoo! internal memo authored by Brad Garlinghouse, a senior VP at the company. The memo is a rant against the typical list of woes that face big companies (e.g. the contradiction of being spread too thin yet having too many people, duplicative products and misaligned goals across the company). What I've found most interesting hasn't been the memo but instead the responses to it.

For example, in a blog post entitled Yahoo’s Brad Garlinghouse Makes His Power Move Mike Arrington views the memo as a clever attempt at an internal coup by Brad Garlinghouse. However even more interesting is the following comment in response to Arrington's post by someone named gullova which is excerpted below

Yahoo continues to get whipped by Google because its leaders can not get the product and engineering teams to focus on the right projects.

Witness Panama (the new ad system). Yahoo has been talking about Panama since early 2004. Yet the product they are launching is barely what Google had 2 years ago.

They threw hundreds of people at Panama, hurting other projects along the way, yet ultimately they are building the wrong product. Panama is far too focused he needs of search advertisers, which makes little sense since Yahoo’s search share has been shrinking since the day they dropped Google and launched their own search engine.

Had Panama instead been about display advertising, Yahoo could have at minimum increased monetization on Yahoo, which lets remind ourselves is still the largest site on the web and which they could monetize at 0% TAC (so its all gravy to the bottom line).

Yahoo is full of guys like Brad who can articulate themselves well and give great presentations. The problem is that the engineering team doesn’t listen to them, and the executive team doesn’t make them listen.

If they really want to get listened to, they should just shut down Panama and run Google ads instead. Its not a stretch to say they’d probably make more money.

The last sentence is the kicker for me. What if instead of competing with Google by funding its own search engine and advertising product, Microsoft partnered with Google like AOL has done? One of the pros of doing this are that it would free up a huge commitment of resources in competing with an industry leader that is years ahead of Microsoft to then focus on building applications that grow its audience directly which is then left to Google to monetize. Another possible pro is that the average revenue per user (ARPU) may go up with Google AdSense + AdWords being used to monetize Windows Live and MSN audiences as opposed to Microsoft's offerings. However a couple of minutes searching online doesn't given enough public data to determine whether this would be the case or not.

The cons are many. The first is that Microsoft would be seen to be admitting defeat if it switched to using Google's monetization engine although from a purely business perspective this isn't a significant con. Another con is that Microsoft would be enriching a competitor who is targetting one of its cash cows for obsolesence. See Google Docs & Spreadsheets, the JotSpot purchase and Google Apps for your Domain which are all attempts at attacking the success of Microsoft Office and related products like Microsoft Exchange. In this case, Microsoft would be guilty of being penny wise and pound foolish. The final con and perhaps the biggest problem with Microsoft going with the Google monetization engine is that it makes Microsoft entirely dependent on a single customer/supplier [who was also a rival] for a majority of the revenue from its online businesses.

When I started this post I tried to keep an open mind about the idea but by the time I finished writing it was clear that this is a bad idea. Funny how that happens.