It looks like Microsoft’s attempted acquisition of Yahoo! has come to an end. Apparently, $46 billion wasn’t good enough, but $50 billion would have been. So what’s $4 billion between friends? Ah well. Mini already has a post up having popped a cork, and I’m sure MSFTExtremeMakeover will have something shortly. And I’m sure there will be plenty of analysis posts as to why, why it’s a good thing, why it’s a bad thing, what might have been, and so on.

So here’s mine!

First, so if I understand properly, Microsoft bid $41 billion, Yahoo! wanted $50 billion. So Microsoft came up $5B more, met ‘em halfway… Yahoo! still wanted the full $50B. OK… so if you can come up with $5, why not $10B? And yeah, I understand, these are scarily huge numbers. But hey, if you’re going to sit down at the World Cup of Poker, you know it’s not a $10 buy-in. I actually wonder if it’s too much of a bet-the-company move… e.g. Microsoft can currently afford anyone that’s $46B or less, but more… not so much.

Second… so what’s next? Well, let’s see….

Option 1: Keep at it! Keep at it! Keep at it!

Well, Satya, Brian, Harry, and the gang have to do something. And now that they won’t have too much of a distraction integrating Yahoo!. Plus, this means that most of Microsoft will now align very closely with services, focusing on ads and search. A search bar in every application, every desktop, every skin. And renewed focus on new frontiers, such as XBox and mobile - especially XBox.

Option 2: Buy! Buy! Buy!

Buy someone else! Or elses! But who? Well, how’s this little gem from comScore:

Baidu Ranked Third Largest Worldwide Search Property by comScore in December 2007

To aid in your research and coverage of Baidu’s recent announcement to enter the Japan market with www.baidu.jp, relevant comScore qSearch worldwide data are provided below.

In December 2007, 66.2 billion search queries were conducted worldwide.

In December 2007, Baidu.com Inc. was the third ranked search property worldwide with 3.4 billion searches, capturing 5.2 percent of worldwide search share.

Worldwide Search Top 10 December 2007 Total World Age 15+, Home and Work Locations* Source: comScore qSearch 2.0
	Searches (MM)	Share of Searches
Total Internet	66,221	100.0
Google Sites	41,345	62.4
Yahoo! Sites	8,505	12.8
Baidu.com Inc.	3,428	5.2
Microsoft Sites	1,940	2.9
NHN Corporation	1,572	2.4
eBay	1,428	2.2
Time Warner Network	1,062	1.6
Ask Network	728	1.1
Yandex	566	0.9
Alibaba.com Corporation	531	0.8

Baidu is the dominant engine in China, NHN is www.naver.com, which is the dominant engine in South Korea. Oh, and today, 5/4/2008, NHN is worth about $11.25B (current price, in KRW), and Baidu is worth $12.36B (current price in USD).

Naver hasn’t shown any propensity to move outside of Korea, and for the most part their stranglehold on South Korea is their huge question and answers site (which is what Yahoo! Answers, Microsoft QnA, and Baidu’s iKnow are based upon). Their search, last I knew, wasn’t terribly great.

But Baidu…. Baidu is doing real search. Baidu just launched in Japan earlier this month. And they have the currently dominant question and answer site, although TenCent, which runs QQ, the dominant instant messenger in China by far, is looking to create their own version that may cause some trouble. And Baidu has got heavy competition from Google.

Now, there are certainly issues with buying Baidu due to the Chinese government. But… well… at the end of the day, those Yahoo customers aren’t going anywhere quickly - not to Google, not to MSN. That’s one of the key reasons why, IMHO, Microsoft wanted to buy them. But that isn’t happening, so those customers stay with Yahoo. Now, Microsoft still needs to get some additional customers somehow, somewhere. If not from Yahoo, and if not from Google… well, for me, I’d start looking abroad really quickly myself.

I’m attending WWW2008 in Beijing this week. It’s turned into a big of a monster conference… nine simultaneous tracks over three days, not to mention a day of workshops and tutorials! Yow! And I’m seeing a number of colleagues from the usual haunts here as well. Both Kai-Fu Lee, head of Google China, and Harry Shum, head of Microsoft’s Live Search development, each gave keynotes, and I thought the themes on them was quite interesting and contrasting.

Kai-Fu Lee’s theme was Cloud Computing, or moving to a world where data and computation was handled on remote anonymous servers and applications then ran. He gave an overview of a number of Google applications that ran on this - Search, Mail, etc. I was struck by one comment he made, which is that cloud computing frees people from the monopoly of a single company controlling everything. Except, of course, the company that runs everything in the cloud for you…. Meet the New Boss…. Same as the Old Boss! But digs at Microsoft aside, the path outlined was clearly focused on Web applications built out on cloud computing, with those applications all leveraging large scale, reliability, and naturally massive amounts of data to handle things.

Harry’s talk was more of a Company Meeting talk, in which he handed the microphone to Graham Sheldon to show off some demos, in particular highlighting some of the cool things MSRA is doing as well as some of the latest on the Live Search release. They led off with what I thought was the best, which is some work from MSRA’s speech group that extracts speech from video and then enables you to see related videos while watching them. It was put together well, so it isn’t so much a “watch while on the Web” demo but “imagine you’re watching TV” video. I’ll see if I can’t find a link, but good stuff. Also shown was Guanxi, which tries to do a people / relationship search… in this case, it showed who was related to Bill Gates. They also showed a demo where you could do query-by-image, which would show images related to a target image. I need to ask some of my former UW colleagues who did things like QBIC (Query By Image Content). The demos of released Live Search features were focused on new features in the News and Local Verticals, including some cool stuff from the Maps team (which continuously produces some great stuff). Oh, and they have a few things on health they’re experimenting with, and trying to get things hooked up with the HealthVault.

OK… so we have two “My company is doing cool stuff, come work for us!” keynotes. But do we have any insight here?

Yes. Google, as widely reported often and everywhere, is busy making an operating system platform of cloud computing that they then build their services on. They’re not actually selling or providing a cloud - Amazon is, with EC2 and S3. But they’re creating the applications that depend on the cloud.

Microsoft, on the other hand, isn’t really pushing the cloud platform. They have a number of components for that, but the demos shown are all slices on search. But they’re certainly not talking about the power of their platform; they’re talking about cool features. But I worry along that line. The problem they have, which they and Google are trying to address, is user flow. Users don’t go to a vertical, they go to search. So now the problem is to discover intent on when it’s appropriate to show essentially a house ad for a vertical with some content, and then create a compelling, and consistent, experience as a user moves from “search” into “news” or “health exploration” or whatever they’re doing.

What I can’t help but wonder is why neither appears to be really pursuing differentiated domains and brands. For example, I still don’t think of Google, Yahoo, nor Microsoft when I think “news.” I think CNN. And really, I don’t think “news search” so much, I want more of a news paper. Archival search is great, but should be from within the news portal. To that degree, I wonder why “Live News” isn’t more MSNBC, or even just a different URL, such as www.livenews.com (it’s some random news site… probably buyable!). Certainly there’s lots of direct visitation to www.youtube.com, and I’m still more familiar with www.mapquest.com than the URLs for Google, Yahoo, or Live maps.

Anyway, food for thought… as always, I’ll lie about updating this later as the conference progresses.

Update 4/25: We (a number of anonymous conference delegates, and yours truly) now have short synopses on all the keynotes. In order:

• Kai-Fu Lee, Google: Use our stuff!
• Harry Shum, Microsoft: We have stuff!
• Sir Tim Berners-Lee, W3C: I invented stuff!
• Robin Li, Baidu: I paid for this stuff!
• David Belanger, AT&T Labs: We route stuff!

In fairness, we’re sort of making up Robin Li’s synopsis. Sir Tim’s keynote was somewhat, uh, long and rambly, and after about 30 minutes of it the audience in the Great Hall of the People got restless and started heading to the drink counters for more beer and wine. Sadly, by the time Robin got to the stage, the audience was in no mood to listen and was already engaged in conversation, so we’re not really sure what he said. But Baidu did sponsor the banquet, which rocked, so we thanked him for that.

David Belanger’s keynote was the best in my opinion… and not just because he didn’t do either a passive-aggressive product placement speech or an aggressive-aggressive product demo speech. He just talked about content, experience and devices, and networking to them and a lot of the challenges. For example, apparently as of 10 years ago when AT&T licensed out its rotary phone service, that was still upwards of a BILLION dollar business. For rotary phones. When a new touch-tone costs $10, or is often free. The main takeaways were that (a) there are loads of devices and enpoints, and it’s all increasing, and (b) the observation and re-iteration that old devices don’t go away slowly. The last is ignored at people’s peril… people hold on to things a lot longer than nearly everyone else would like.

So, after years and years and years, Microsoft is finally buying Yahoo!. OK, they’ve made an offer, but really, how often does Company A make a big public notice about an offer only for Company B to say, “Um, no thanks…” The writing was pretty much on the wall when Semel was booted and Jerry Yang became the CEO (Oh, and in an aside, he just left the Yahoo! Board of Directors…. yeah, the deal is pretty much done.). So right now every talking and writing head is busy sizing up the deal and making broad predictions. There’s lots to be said for the pro and the con side. So, rather than actually give some predictions, I’ll see if I can’t analyze the two sides and see where things might end up. To start, I’ll talk about the cons.

Microsoft and Yahoo: It can’t possibly work
There’s lots of reasons why Yahoo and Microsoft won’t work. Here are a couple:

1. Neither Microsoft nor Yahoo has shown it can take share away from Google. Microsoft is in fact losing share. So putting Microsoft in charge of a bigger operation will simply cause share to evaporate from Yahoo as well as Microsoft.
2. Yahoo is a Linux shop, and the core technical expertise really won’t transfer well. Anyone remember the Hotmail.com acquisition? But hey, Google is just up the street!
3. Independent of Microsoft vs Linux technologies, Yahoo is a much different culture than Microsoft, even Microsoft’s SVC campus. The people just won’t mesh.
4. Microsoft execs really won’t be able to manage Yahoo. Parting out Yahoo to the appropriate teams (Search and MSN, mostly) will randomize those teams. Having one local exec in charge in California will also be unlikely to work, as Yahoo will turn into a random fiefdom competing with Search and MSN.
5. The ~5 years it’ll take for Microsoft to absorb Yahoo on the portal side alone (Hotmail + Yahoo Mail, MSN Money + Yahoo Finance, MSN Messenger + Yahoo Messenger, etc.) will distract from doing something new that’ll convince customers to leave Google.

That’s good enough for now. But let’s pause for a moment and ponder… what if Ballmer isn’t a complete idiot, and this will work?

Microsoft and Yahoo: The Giant Awakens
Let’s pause for a moment and think about what Microsoft and Yahoo look like together…

1. Yahoo Search now with MSN Technology. I’ve said this before, and I’ll say it again… meta-search beats regular search for relevance when the engines being used are roughly the same quality. Go ahead, try MetaCrawler with just Google, Yahoo, and MSN. Better yet, compare Google with Yahoo + MSN (click on the lovely buttons to see the results side by side). This will make search better, and all Microsoft entry points will have it (Yahoo, MSN, Live, etc.).
2. MSN / Live is now Yahoo. Microsoft completely botched their “Windows Live” and “Live” offering. Now, rather than go back to MSN (which they didn’t like, thus the new brand), or pick a new brand from scratch (putting them in the same boat as Live), they have a new brand. A good brand. One people like. Yahoo! MSN Messenger and Hotmail will probably survive, but the rest will likely transform into their Yahoo branded counterparts, slowly but surely. Granted, the technology will almost certainly be Microsoft under the hood.
3. Complete portal dominance. AOL is going to scream at this, assuming their new Time Warner lords and masters care. MSN and Yahoo Messenger will be combined. Yahoo Mail and Hotmail will be combined. MSN Money and Yahoo Finance will be combined. MSN and Yahoo home pages will be one and the same. For all intents and purposes, the new entity will be “The Portal.”
4. Combined infrastructure services. It isn’t just the consumer-facing services that will benefit. Hotmail and Yahoo will combine their anti-spam and anti-phishing technology (hell, you can just cascade them and likely get a huge improvement). Yahoo Search and MSN Search will combine their anti-spam in search for fantastic index quality. And things go from there.
5. MSR + Yahoo Research. Yeah, a number of people from Yahoo Research left MSR (Usama Fayyad), but there are some serious heavy hitters at Yahoo Research: Prabhakar Raghavan, Andrei Broder, Ricardo Baeza-Yates, and Ron Brachman to name a few.

Yeah, lots of reasons… so people will go back and forth. But here’s my own thoughts on why this will work, to some degree, no matter what:

The ad market wants a strong #2 to keep #1 honest.

It doesn’t take much to find lots of grumbling about Google’s policies towards advertisers, especially in the syndication market. Lots of people feel Google is charging more than it should. With Microsoft now as the #2 player, the market will do what it can to ensure Microsoft is strong enough to keep Google honest. Certainly, the market won’t care if Microsoft remains #2 forever, but two choices is good. Incidentally, the same doesn’t hold for whomever is in the #3 position. The market will encourage #2 to survive, but #3 and down… best of luck, gentlemen.

Finally, here’s another thought. The ad business is cyclical, and we haven’t really seen a downturn in ad spending… yet. But all signs point to a downturn coming. Microsoft is actually making some serious bank on Vista (surprise!) and Office, and will certainly offer very aggressive pricing to gain market share in an ad downturn from Google. I’m not saying short Google, but boy would I be hard-pressed to buy now….

Update 2/11/08: OK, I know nothing, and this deal wasn’t previously in the works like I thought. So don’t come to me for stock advice!

A friend of mine was walked out of Microsoft today.

I’m not talking about Stuart Scott, the now former Microsoft CIO who was canned for “violating company policies.” No, another friend decided to leave the MSN Live Search team and join Google Kirkland. In contrast, when I gave notice, I had the luxury of two weeks to wrap things up, say good-bye, and all that. In truth I didn’t need that long, as I was at a good stopping point, but the courtesy two weeks is there for both parties: I had two weeks to wrap up the stuff I wanted, and Microsoft had two weeks to have me wrap up the stuff they wanted. Another thing that this does is I felt I left Microsoft on good terms, and while I love my new job, should circumstances change in 5, 10, or 15 years, I’d certainly consider going back to Microsoft for the right opportunity. In fact a number of people have done that, including my former manager at Microsoft as well as our former VP, Christopher Payne. And presumably, Microsoft would want me not just for my experience at Microsoft, but also for my experience outside of Microsoft (apparently, Steve B is pursuing VPs from outside the company rather than promoting from within, as they need some new blood at the top!)

Other colleagues I knew from Microsoft that went to Google were shown the same treatment. So why was I shown the love and not my friend? Well, as near as I can tell, Microsoft doesn’t want someone who has decided to leave for Google around so that other employees can ask all the obvious questions and think about going to Google themselves. Google is clearly the competition, and while it’s OK to leave Microsoft and do something random (like work for Amazon), leaving to compete with Microsoft is an unforgivable offense, apparently up there with violating company policies.

I still have a lot of respect and admiration for Microsoft and the people there, but this is one policy I wish they’d rethink. Companies are groups of people, and the people move from one to the other. At times they’ll compete, and at times they’ll work together. Treating someone as the enemy because the company they’re joining is currently competition is short-sighted and naive; all it does is reinforce the negative image of Microsoft as the black hat and Google as the force of good. And it destroys a potential future rehire… after all, who would want to go back after being shown the door like that?

Update 11/9: Tim Faulkner at ValleyWag, you are a total hack. If you’re going to source my post and then exaggerate the Hell out of it, at least have the courtesy of citing a source. Of course, you’re misrepresenting what I’m saying so you can ensure your nose is that Googley pastel brown, so I can see why you might not do that. Hack.

Update 11/10: Looks like I made Mini again! Probably making some former co-workers grumpy. As I think about the above, there may be other reasons to show some people the door immediately besides worrying that a person leaving might inspire. I can’t think of any that aren’t lame, but that’s me.

Update 11/11: Huh, I made SlashDot… hopefully my small little server will survive. Some points for those reading: I highlighted above, it’s my pure speculation that MS folks don’t want people leaving for Google to stick around to talk to other employees. There are other reasons, which feel… well, I’ll let you make the call:

• Microsoft is fairly free internally about schedules, new anticipated features, and so forth. Microsoft may not want someone going to a competitor to learn anything new and imminent.
• Other employees may want to talk to the person leaving, and that might put said person in breach of the non-solicit.
• Employees going to the competition aren’t necessarily motivated to do a good job wrapping up, so best to cut things off now.
• Going to the competition is declaring yourself as competition. Get out now.

In truth… I suspect that it might be the last that’s the real reason, petty as it is. Everything else, even the worry of people talking to the guy going to Google, feels like a weak reason. People will still contact the guy after the fact to find out what was going on. Schedules don’t change that quickly. Talking about how green the grass is on the other side isn’t breach of non-solicit. And professional employees are professional. So… it boils down not to a logical, business reason, but an emotional one.

This all being said, the facts are that people leaving Microsoft don’t stay their two weeks. They might not be given the perp walk out the door, but their badge is turned off pretty damn quickly. And this isn’t just the one friend who left recently; I can name three others that this happened to as well. But those who are leaving elsewhere are given their two weeks, and typically there’s a farewell lunch or dinner. It’s a crappy policy, and should change.

And Microsofties reading this — yes, I did bring this up when it happened to the first guy, and was told by our VP that “X is our past, not our future.” It was clear this wasn’t a fight I was going to win, and shouldn’t even pursue.

OK… so today Microsoft finally beat out Google and Yahoo for FaceBook… investing $240 million for a teeny tiny 1.6% stake, valuing FaceBook at $15 billion. So, let’s see where that puts FaceBook… (and I’ll now use a link to Google Finance, which provides the chart I want nicely:

Right… so FaceBook is right now somewhere between Southwest Airlines and Ford. And they’re not even public yet! Now, the reality is that MS just put in $240 million for a deal, and the valuation may be $15B, or it may be somewhat smaller when the company goes public (or is acquired). What this really says is that the Search Wars have really begun — Microsoft, Google, and Yahoo are going to start tossing around big, and I mean big, dollars here to get a big share of the advertising market.

Wonder how long it’ll take for there to be a MSN Live Whatever Search box on the FaceBook home page…

I noticed yesterday that I made Mini-Microsoft! OK, it was just a quote from Kip Kniskern at LiveSide.net, but still nice to be noticed. I think. In the same article, Mini goes on to grouse about whether Microsoft should buy FaceBook. Aside from FaceBook booting his pseudonym personality, he brings up the classic death trend of social networks past: boredom. Or perhaps resignation:

Chat with some senior leadership in the next week and ask them, “Hey, what do you think about Microsoft buying Facebook?” I’m curious if your experience will be like mine lately: usually, a calm comes over the face and the senior leader is quite articulate in explaining all the reasons why it would be dumb to buy Facebook, how it won’t happen, and how it’s so wonderful to partner with Facebook for ads and to also ensure we’re a great platform for people to develop Facebook applications on (along with being a platform for future social networking applications). Consensus and clarity seems to have been reached on high around this, a new page has been put in the strategy hymnal, and everyone is singing to it.

I can’t say whether FaceBook is worth several billions. However, some interesting points:

• I’ve been busy reconnecting with people from college I haven’t seen in a decade. Imagine if I never had to reconnect, but was able to keep track of people through high school, undergrad, and grad school.
• I still visit FaceBook at least every other day, and I love updating random status blurbs.
• Occasionally, I do accept an application request (I’ve ignored the Zombies, Ninjas, and similar things, but the NFL IQ is pretty fun!)
• I can’t imagine actively working with more than, oh, two social networks. And even that’s a stretch. I think there can only be one.
• I still stand by my comment that FaceBook is the only thing I’ve seen in a long, long time that has the potential to be a default home page. And that’s worth some scratch.

Now, this being said, FaceBook is facing a number of issues… dealing with scale, likely refactoring tons of crappy PHP into something managable, figuring out how to be insanely profitable (and I don’t know the numbers behind the Microsoft ad deal, but I can’t imagine display banner ads are making money!), and so on. And competition… Live Spaces now has a news feed, and Google is primed for a re-release of Orkut (this time, without stolen code!) But you know, I remember wondering why Amazon, Microsoft, and others decided to get into the auction game after eBay had won the day. A friend commented that Amazon wanted in before eBay controlled the market, and all I could think was, “um, dude… they already do!” A few years later, this was proven true when all the also-rans abandoned the field.

Now, will FaceBook be the one, or will it suffer the same fates of Friendster, Orkut, Yahoo 360, and so on? Personally, I think it’s gonna be the one. Applications will add the spice and freshness, they’ll fix their scale and coding issues, and they’ll figure out how to make some cash off of personalized something-or-other (like, oh, I dunno… personalized ads! or personalized search with personalized ads! or personalized product recommendations!). This being said, there’s still some big chances that FaceBook gets scooped by competition, but if it’s almost 2009 and FaceBook is still in the lead, well, Game Over.

Here’s why Windows Live ID (ne Passport) sucks:

Fundamentally, a login service is amazingly simple… an ID and password are presented, and the system responds with some credentials authenticating the user or denying the user. Yeah, there’s some state, but that’s fairly easily replicated, so there should be tons of boxes with said state so if one goes down, another can pick things up.

The above error was hit at about 1:30 AM on a Saturday (yeah, whatever), and I submitted the request twice. Sigh. And to think I was trying to log in to HealthVault, Microsoft’s newest release to store Health information, to check it out. Oh well.

Come on guys… Passport has been around for what, ten years now? You’re not going to beat anyone in services if you can’t ensure that simple services don’t block people from getting access because they’re down!

I just tried to save a new document (MS Word), on a new computer. It launched setup when I clicked on the “My Documents” folder. I don’t know why… all I know is that Save As… should not cause something to launch… it should just save the document!

I suspect this, and a host of other issues, are why people are generally frustrated with Microsoft products.

Sigh. And I had time to pen a quick blog post while I was waiting to save a document! What productivity!

Just a quick shout out to everyone… I’ve decided to leave Microsoft and join Amazon.com!

Now, some of you are certainly going to be asking, “Why would a long-time established search guy leave one of the major search players?”

The reasons are fairly mundane, as it turns out. I need to move my career forward, and there is a great fit and opportunity at Amazon.com to do that. I’m still very interested in search and will remain involved, such as with SIGIR, WWW, and WSDM. Further, the first task I’ll be working on at Amazon is item authority and matching, which is a nasty internal search problem. Given a huge catalog of products for sale, and a new set of products, identify which ones are already in the catalog and which ones aren’t. The rub is that mistakes cost money, and lots of it. Unify two products that aren’t the same, and when a customer orders one he or she might get the other, resulting in a return and other headaches. Miss things, and you end up with lots of duplicates which clutter search results.

So far, I’ve been hugely impressed with Amazon.com. My first day was Friday, which was a random day (vs a Monday when they normally have an orientation). But I got my badge and laptop in minutes of arriving, had a clean office and desktop, and in general everything was good to go! Even my e-mail was setup with the right alias (selberg!) This has been my best onboarding ever. All other companies, including Microsoft, invariably had me spend the first week pushing through various issues that weren’t solved by the employee onboarding… like getting a computer, waiting for an e-mail account, getting my e-mail alias fixed, etc. Amazon’s reputation for being efficient is well earned!