By now most people interested in technology news have heard the story initially reported by the New York Post in the article Bill's Hard Drive which claimed that Microsoft was planning to purchase Yahoo! and the subsequent rebuttal of this news in the Wall Street Journal's article Microsoft, Yahoo Discussed Deal. Since I work at Microsoft I'm not supposed to comment on rumors like this so I'll just point to a couple of opinions.
Charlene Li, an analyst at Forrester Research, wrote in her blog post entitled Why Microsoft + Yahoo! makes sense – and why it won’t work that
But there is one major reason why I don’t think Microsoft executives have the stomach for any sort of brand rationalization -- the continued dual branding of Windows Live and MSN. Each time I have a conversation with Microsoft about Windows Live, I get a different explanation of what it is and how it fits with MSN. If the company can’t event figure out its branding strategy with existing properties, I don’t hold out much faith that they could do so with a premium brand like Yahoo!
Robert Scoble writes in his post No “Microhoo”
I’ll tell ya one thing, though. It sure made for interesting conversation with a Yahoo employee I met tonight. We were starting to draw up where value would be built and where it’d be destroyed. There were a lot of places it would be destroyed and if two guys drinking beer can figure that out in half an hour, I’m sure that caused smarter people than us to put on the brakes. For instance one of Yahoo’s biggest properties is its email service. But that’s one of Microsoft’s biggest properties too (aka Hotmail). Then you look at finance sites. Microsoft is doing pretty well there with Microsoft Money (I met an employee who works there too and he said both Microsoft and Yahoo are way ahead of Google in finance traffic). Then you look at mapping. Again, they are pretty strong competitors there. Search? Who’s search technology would be thrown away? Advertising technology? Both Microsoft and Yahoo are pretty close there. Flickr? Clear value creation in an acquisition cause Microsoft doesn’t have anything like it. Same with Del.icio.us, Upcoming.org, Yahoo Answers, MyBlogLog. Portal? Yahoo is clear winner in brand name, but that’s just cause Microsoft has done an awful job in rebranding everything as “Live.”
As for me, two phrases popped into my head when I heard the rumor; hail mary play and post merger layoffs. I guess word association is mother...
In related news, Mike Arrington reported yesterday that Yahoo To Shut Down Yahoo Photos In Favor Of Flickr. This is a shockingly disruptive move that will definitely piss off users given how different the features and target audience of both sites are. Why would a Web savvy, user-centric company like Yahoo! do something that will so obviously cause bad blood between them and their users? How about all the employees working on Yahoo! Photos who busted their butts to make it one of the Web's most popular photo sites? The answer is simple. Yahoo! has redundant and competing products which they could no longer rationalize.
Now go back and reread Robert Scoble's post linked above then consider what a YHOO-MSFT merger would look like again.