Yahoo + MSN IM Merger my 2c's

Posted by Ian Holsman Sun, 23 Oct 2005 13:36:00 GMT

What was Microsoft thinking when it announced this deal?

If you belive the AOL buyout rumour where microsoft and Google+Comcast and potentially Yahoo are all vying to buy it this announcement makes no sense.

AOL currently has a 50m IM subscriber base, where both Yahoo and MSN has ve 25m a piece, and Google has 1m if it’s lucky.

So let’s imagine your a Google exec. you have a nice ad-revenue stream, and this GTalk thing is going to be a nice little earner if it could get some legs (user base)

Then on the grapevine you hear that AOL is up for sale, and MSN is interested. now.. you think to yourself.. ok I could lose a bit of revenue, and the gtalk thing will be a bit harder now (Metcalfe’s network effect and all) but it is still doable… and geess.. if we partner up with comcast we could make a offer as well, and get those 50m IM subscribers over to the ‘good’ side and they wouldn’t hurt our email user base either.. (and we can give the content stuff over to comcast who could make good use out of it). These users would make our dream come true.

So they make a matching bid. and the stories fly.

Now.. Imagine this exec’s horror when he finds that Yahoo + MSN are going to co-operate with IM.. He is seeing all his gtalk dream sink.. No one would be interested in it if Micrsoft buys AOL. They will all be using the other guys IM service and whatever VOIP solution they come up with..

All of a sudden this AOL deal got a lot more important for him. now it isn’t just a matter of losing 2.5-10% of it’s revenue base.. It is threatening it’s entry into the telco market. It NEEDS AOL even more now.. and it going to fight tooth and nail to get it.

If you were Microsoft why in heavens name would you want the other potential bidder to want AOL even more than it currently does?

Unless of course Microsoft + Yahoo don’t really want AOL in the first place, and are trying to get Google+Comcast to buy a really large lemon for a even bigger price.

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microsoft getting 70% margins - a clarification

Posted by Ian Holsman Sun, 02 Oct 2005 18:57:00 GMT

I was reading in Brian’s blog yesterday that Microsoft is currently getting a ~70% profit margin on their windows and office products.

what they forgot to take into account was how much the product-development and R&D costs were to develop office.

So while 70% seems high at the moment, I’m sure a good portion of that is made up of paying themselves back for the time spent developing the thing in the first place.

Update: Brian clued me in a bit. It was his original post.

Update2: it wasn’t product-dev or R&D, but general corporate expenses

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Google is not just a advertising platform

Posted by Ian Holsman Mon, 19 Sep 2005 00:34:00 GMT

in Daring Fireball John talks about how google is not a ‘web os’, but a advertising company. Which I agree with, Google’s customers are the advertisers. But in order to grow at a rate they want to, and to protect their core business they need compete against the other search possibilities… which are Yahoo and Microsoft otherwise these companies could out-manuver them and make Google irrelavant in the medium term.

Google competes directly with Microsoft with MSN, MSN-Messenger, and HotMail. The largest threat (IMHO) to MS if Google develops some kind of office lookalike which will start affect sales. If I were Google, I would donate a couple of their staff to work on Star Office to make it a better product. (or fund some of the existing star-office developers to achieve the same thing).

I see the largest threat to Google from Microsoft is Microsoft’s dominance on the desktop. While people currently do searches from their browser and have choice on who they use, imagine if searching was more deeply integrated into the desktop, so that direct searches are no longer done, but they are done indirectly (commoditizing the search so that no one cares which engine serves the results).

Google also indirectly competes with them for staff, they even set up an office in Seattle to attract the softies over. How can you develop the next big thing if you don’t have the rocket scientists building it?

So this is why Google is offering more things that Yahoo and Microsoft currently do, and will continue to do so, and why Yahoo and Microsoft will continue to try and improve their search, as well trying to make it more of a commodity at the same time.

Personally I hope all three of them keep each other in check all releasing brilliant things and giving me the surfer more choices, and my work the content-provider more traffic. I think the worst possible outcome is if we have a winner, as it would mean less innovation overall.

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