The Goliath called Google

THE strange business of the “takeover” that never was — that of Yahoo by Microsoft — raises some interesting questions. First, who benefited? The story originated in an unexpected place — the New York Post, a lively tabloid publication owned since 1993 by Rupert Murdoch, where one would rarely look for a big technology story.

By John Naughton (Media)

Published: Tue 29 May 2007, 9:03 AM

Last updated: Sun 5 Apr 2015, 1:29 AM

Yet on May 4, the Post reported: “Microsoft has intensified its pursuit of a deal with Yahoo, asking the company to re-enter formal negotiations. The new approach follows an offer Microsoft made to acquire Yahoo a few months ago, sources said. But Yahoo spurned the advances of the Redmond-based software giant. Wall Street sources put a roughly $50bn price tag on Yahoo.”

This story was taken up by the Wall Street Journal, which for many gave it the ring of authenticity, and you can imagine the result. Yahoo stock — which had been languishing on the grounds that the company seemed to have lost its way — rose by 15 per cent in a few hours. The stampede ended in the afternoon, when the Journal revised its story, saying that the Microsoft-Yahoo talks were “no longer active”.

In these situations, someone usually makes a packet out of the hoo-hah, leaving suspicious minds like mine to wonder about the provenance of the Post’s scoop. Were the journalists who authored it sold a pup? Are we looking at the biggest stock-pumping story since Australian gold-mining shares went out of fashion? I think we should be told.

The second question is, in a way, more interesting. What are Microsoft, Yahoo et al going to do about Google? Nothing they’ve done individually has made any dent in the search giant’s inexorable march towards world domination. Microsoft’s alleged wooing of Yahoo suggests somebody has been reading the memoirs of Prince Klemens Wenzel von Metternich, who was the foreign minister of the Austrian Empire during the Napoleonic era.

In a recent amusing essay, the Economist magazine in London argued that Metternich would have no difficulty in identifying Google as the contemporary equivalent of the Napoleonic France that had humiliated Europe in his youth. Yahoo, eBay, Microsoft and Co are the latter-day equivalents of Russia, Prussia and Austria. Metternich’s strategy was to forge an alliance among those three monarchies to create a ‘balance of power’ to contain France. Google’s enemies, he might say, ought to do the same thing.

Which is what they’re all trying to do. For example, Yahoo, AOL and Microsoft’s MSN have formed an alliance with NBC and News Corp to create an online video platform to compete with Google’s YouTube. Yahoo has signed a deal with Viacom, which is suing Google for $1bn for copyright infringement. And Yahoo has announced a deal with a group of newspaper publishers to run their content on Yahoo’s websites and place advertisements on the papers’ websites.

But the omens for these alliances are not promising. Apart from history repeating itself as farce, there is the awkward fact that the top dog - Microsoft - doesn’t do alliances, at least in the accepted sense of the term of a balanced relationship between equals. Of course, everyone is keen to announce an “alliance” with Microsoft, but that’s just the equivalent of a natural human desire to be nice to crocodiles.

An even bigger obstacle to a Metternichian strategy of containment is Google’s irritating failure to over-extend itself. Google has refused to oblige in this respect: it declines to confront Microsoft directly. Instead it has left the software giant to enjoy its monopolistic hold on the platform - the PC - knowing that it is a wasting asset as more and more computing moves into web services delivered via the Internet. So if alliances are not the answer, what are Microsoft and co going to do about Google? Answers please to billg@microsoft.com and terry.sempel@yahoo.com. Do not write on both sides of the email at once.