February 3, 2008

19 Microsoft/Yahoo synergies that could revolutionize the Internet

Many – perhaps most — commentators on Microsoft’s bid for Yahoo are thoroughly missing the point. The most interesting part of Microsoft’s bid for Yahoo isn’t the horse-race retrospective “How did they screw up so much as to need each other?” It’s not the incipient bidding war for Yahoo. And it’s certainly not the antitrust implications.

The Microsoft/Yahoo combination could revolutionize the Internet. I’m serious. The opportunities for huge synergies might just be enough to blast the merged companies out of their current uncreative, Innovator’s Dilemma funks. Search is open for radical transformation in user interface, universal search relevancy, Web/enterprise integration, and just about everything to do with advertising and monetization. Email stands to be utterly reinvented. Portals and business intelligence have only scratched the surface of their potential. And social networking is of course in its infancy.

Here’s an overview of where some synergies and opportunities for a combined Microsoft/Yahoo lie.

Search and contextual advertising

Query serving costs are variable, and some marketing costs are performance based. But there are major economies of scale in:

Email and antispam

Mail storage and serving costs, for the most part, are variable according to usage. Even so, there are important economies of scale in:

Information portal and business intelligence

A few hundred thousand people rely on investment terminals such as Bloomberg or Reuters for their business news and general information. They’re pretty locked in. But the whole rest of the market is still up for grabs. Bill Gates’ “Information at your fingertips” speech was over two decades ago, yet Microsoft is still not doing great as a provider of information or analytic tools (with the huge exception of Excel).

One obvious synergy is to deliver tame MSN-style traffic to the more established Yahoo portal. A second is to finally get serious about making SharePoint an integrated Web/enterprise portal. A third, less-obvious one – and an area I really need to write a lot more about soon – is the integration of business intelligence tools with public data sources.

Gaming, virtual worlds, identity, and social networking

Social networking and gaming are both evolving at ferocious speeds. Just think of Facebook, Twitter, Scrabulous, Second Life, or console games. Some major and almost inevitable future developments include:

These are all big problems, where Microsoft and Yahoo actually gain from adding each other’s heft.

As long as the above list is – 19 items – it is far from complete. Please point out any you feel I overlooked. As for merger negotiations, antitrust, and eventual operational issues – I’ll leave those to another time. This post is long enough already. 😉



15 Responses to “19 Microsoft/Yahoo synergies that could revolutionize the Internet”

  1. Bradley C Hughes on February 3rd, 2008 9:12 pm

    I can see huge potential for integration of social network data into factoring search engine results.

    I would expect to see the option of search results with personalised biasing or weighting, based on multiple personalised data sources, including:

    personal keyword relevancy cloud (could be based on keyword frequency from my email history for example)

    integration of weightings from my social networks, factoring in the number of thumbs-ups assigned to sites by my contacts, friends, etc.
    eg. StumbleUpon, Digg, Technorati.

    Email filtering and searching remains a painful problem.

    With over eight years of archived email and hundreds of thousands of messages, I’m heavily dependent upon the filtering capabilities and fast indexing/search functionality in Eudora 7.

    No web based email service remotely comes close to speed of search and ability to view the progressive filtering reporting that Eudora provides me.

    Gmail is starting to feature more in my day to day email activities. I have two Gmail accounts that I often log into and use, but I still pull all the mail down into Eudora for filtering and archiving as well.

    I could never use Outlook in any of its previous or current versions. Something radical would have to change in Microsoft land for me to ever consider using their email software in any serious fashion. I do use Outlook for one administration account for one business I am supporting, just enough to remind me how much I don’t like using it.

  2. Curt Monash on February 3rd, 2008 11:07 pm

    Agreed that Eudora is much better for searching than Outlook.

    Now if I could just remember how I made Eudora talk to Gmail, as I just am moving my other email domain over there as well … 🙂

    I think re the social networking/search integration, that it won’t be all that simple. In effect, I think there will be a hybrid of DMOZ and Digg, as one of the most important kinds of social networking. I don’t know how fine the salami will be cut on that; in MOST cases, your close personal friends won’t have already searched for the sites that you need. Blogrolls are an exception to that generality, however, which is why I just registered the BlogrollPlus.com domain. 🙂


  3. Geert on February 4th, 2008 3:24 am

    Great summary of synergies. The thing I’d like to add is the power that both companies can have in growing the size of the online advertising business within the advertising expenditures. If you know that today the total advertising business is worth 520 Billion dollars, the online part is only about 8% of that business and about half of that is search. Of course there is still enormeous growth in search but we shouldn’t discharge display advertising, just yet. Where is all the money from on branding campiagns on billboards, TV, buses, etc going to go when media managers will understand that consumers today are spending more than 20% of their media time online? Is it all going to go towards search? I don’t think so!

  4. Nate on February 4th, 2008 2:24 pm

    I think your premise is wrong. Yahoo brings nothing to Microsoft except smart people. Microsoft already has everything in place to take advantage of these email/web/marketing synergies. If Microsoft had the vision and drive to do any of this then they would have done so already. Nobody from Microsoft is going to listen to a bunch of Yahoo people (and probably most of the Yahooers are going to leave anyway).

  5. Curt Monash on February 4th, 2008 7:09 pm


    What you may be overlooking is that current levels of business ARE relevant — they affect how fast there’s hope of monetizing an investment. Similarly, they affect how many customer there are to retain via service enhancements.

    And what you’re surely overlooking is that Yahoo actually has experience with user responses to their features in all sorts of areas where they have leading product — photos, finance portal, fantasy sports, bookmarking, and many more.


  6. Jeff Staddon on February 4th, 2008 9:47 pm

    Good point Nate. I totally agree. I think this will be a big mistake for both Microsoft and Yahoo. I doubt Microsoft will allow Yahoo sufficent freedom to complete with Google. See my post at:


  7. Text Technologies»Blog Archive » Sturgeon’s Law, and the future technology of social technology on February 5th, 2008 6:04 am

    […] Microsoft/Yahoo synergies (section on social networking) […]

  8. Text Technologies»Blog Archive » Microsoft, Yahoo, and innovation on February 5th, 2008 10:27 am

    […] However, I think he and a lot of other observers are missing something this time — the Microsoft/Yahoo synergies are too large to […]

  9. KiltBear on February 5th, 2008 11:44 am

    In a perfect world, maybe. What examples of big companies merging do you have where the whole actually becomes greater than the sum of the two as opposed to one eviscerating the other? An example where efficiencies are realized rather than a quagmire of mismatched systems and corporate cultures? How will Microsoft suddenly gain the deftness to manage the combined companies when its latest most critical product launch (Vista) has had the worst reception and greatest negative critique than anything that has come before?

    This is nothing more than wishful thinking and pie-eyed enthusiasm. Tying the legs of two runners together does not make them faster. It slows them down and makes them clumsy.

  10. Curt Monash on February 5th, 2008 1:17 pm

    Well, I must confess that Computer Associates’ successful acquisitions had a lot of evisceration in them — but in a variety of product categories they DID actually move the state of the art far forward (mainly those in system management tools). Oracle’s apps acquisitions are looking decent right now. Oracle’s RDB acquisition was a huge success — bigger than Oracle now likes to admit.

    Is that enough examples, or would you like me to keep going?


  11. Text Technologies»Blog Archive » A game theorist’s view of Microsoft/Yahoo on February 8th, 2008 11:54 am

    […] a quick Microsoft takeover of Yahoo. That’s what I thought all along, due to a whole lot of Microsoft/Yahoo synergies. Michael Arrington reports, in confirmation, that there are no viable alternative […]

  12. Text Technologies»Blog Archive » Microsoft could EASILY pay $40/share for Yahoo, in cash on February 10th, 2008 9:57 am

    […] is it? I see tons of synergies, but I’ll confess to not having quantified them. I’m also more optimistic about […]

  13. Text Technologies»Blog Archive » Yahoo wants to follow AOL into the dead pool on February 14th, 2008 10:28 am

    […] is for the Microsoft acquisition to go through, and for Microsoft/Yahoo to unlock the deal’s huge potential synergies — which, while far from being certain, is at least realistically […]

  14. Elder Norm on February 27th, 2008 12:44 am

    I totally agree. While I think that the article makes good points about what could happen, Microsoft and its current top management have ALWAYS stated that its about the money. MONEY FIRST!! How can we make money from this.?

    Google has as their motto, “Do no evil.” Its a couple of guys that are having great fun and making billions doing it. Google earth, google maps with satellite, google apps, google e-mail all for free, up front,. The anti-Microsoft and from the way they make profit, it must work.

    The only chance that I see is that Microsoft has a new batch of sub execs below Ballmer. If they can make things change, then maybe there will be a chance for Microsoft. Otherwise, I am not having happy thoughts about this merger.


  15. 6 trends that could shake up the text analytics market | Text Technologies on June 19th, 2008 5:51 am

    […] 19 possible Microsoft/Yahoo synergies, many of them related to text technology convergence, e.g. between web search and enterprise search […]

Leave a Reply

Feed including blog about text analytics, text mining, and text search Subscribe to the Monash Research feed via RSS or email:


Search our blogs and white papers

Monash Research blogs

User consulting

Building a short list? Refining your strategic plan? We can help.

Vendor advisory

We tell vendors what's happening -- and, more important, what they should do about it.

Monash Research highlights

Learn about white papers, webcasts, and blog highlights, by RSS or email.