Boo-Hoo, ‘Microhoo’

But it's also risky. Primed by Microsoft's prophylactic complaints, government regulators will look hard at the deal, which will increase Google's already dominant grip on search advertising. In addition, notes the somewhat biased critic Steve Ballmer in his letter to Yang this weekend, partnering with Google on this front "seems unwise from a business perspective unless in fact one simply wishes to use this as a vehicle to exit the paid search business in favor of Google." Ouch.

Google The ruling triumvirate at Google—Larry Page, Sergey Brin and Eric Schmidt—knew that no matter what happened with Microsoft and Yahoo, their lead in search was safe. Neither competitor has been able to muster a challenge to Google's ad business, and a merger would have been messy enough to set back both companies. But the Googlers decided that a Yahoo-Microsoft merger could indeed pose a threat, simply because the vast audience it would aggregate would corner the market in mail, messaging and other services. So Google tossed rocks at the proposal in various ways, from charging that the merger would violate antitrust regulations to arranging a test program for the aforementioned Google-Yahoo search ad partnership. If regulators don't kill the program, Google would be more than happy to collect a slice of Yahoo's search revenue.

But though Google is happy that the Microhoo deal didn't happen, there's always that chance that Yahoo, under either Yang or someone else, may one day actually get its act together. Perhaps that could come from a linkup with some new as yet unexpected suitor. Think out of the box here … Amazon? MySpace? eBay? Disney? The Library of Congress? Though those wouldn't help Yahoo's search efforts, a well-managed alliance with any of them would frustrate one or more of Google's ambitious enterprises.

AOL TimeWarner is more than eager to jettison the site, which is a symbol of one of the biggest corporate disasters in history. One tactic Yahoo considered during its defense was taking over AOL in exchange for giving TimeWarner a 20 percent share in the new company. That's a dumb idea for Yahoo—too much overlap—and should be dropped. But if Microsoft wants to bolster its Internet population to make a run at Google in the upcoming cloud computing sweepstakes (where services like storage are hosted not on people's hard drives but services somewhere in the Internet ether), AOL seems an obvious target. AOL is no Yahoo—its assets are lacking in breadth and innovation. But Microsoft could snare AOL for much less than half of what it would have had to pay for Yahoo. And while many of Yahoo's employees would have been ready to run screaming at a Microsoft takeover, AOL-ites would see a Redmond purchase as more of a rescue. Still, Microsoft buying AOL instead of Yahoo would be like a major league team signing Carlos Silva instead of trading for Johan Santana.

Facebook It's sweet for Mark Zuckerberg that all these Internet giants are obsessed with mergers and stopping mergers. That distraction gives Facebook a chance to operate in a less glaring spotlight and, with the help of its new COO, former Googler Sheryl Sandberg, come up with an advertising strategy that will give Google a run for its money.

Users This whole thing was never about real people but the strategic moves of megabusinesses hungry to consolidate power in a dynamic online world. The best thing for the modemed multitudes is to have as many companies as possible trying to come up with novel, innovative, productive and fun services and programs on the Web. Best scenario: Yahoo regains its mojo as an independent, and both it and Microsoft step it up with cool and powerful new services. Worst scenario: the leaders of all those companies spend more time playing the corporate version of Risk than taking risks to develop technology that helps the rest of us.

© 2008