Microsoft and Yahoo! – My Take

Uncategorized Feb 01, 2008

A favorite theory among tech pundits is that the company that will eventually dethrone Google doesn’t exist yet. Rather, it’ll be the brainchild of former Googlers who quit when their current job becomes boring or their stock options vest. Imagine a mass exodus – hundreds of very rich, very smart engineers with nothing but free time and creativity on their hands.

I like that idea. It has a certain romanticism to it. But what if the next, great tech giant doesn’t come from a Googler – but a Yahoo?

If (when) Microsoft buys Yahoo!, how many developers will stick around for what is sure to be a righteous clash of cultures? In his letter to Yahoo!, Steve Ballmer writes that Microsoft intends “to offer significant retention packages to [Yahoo!’s] engineers.” Forty-four billion dollars is certainly enough to buy the company. But does Microsoft have enough money to buy the loyalty of Yahoo!’s engineers? Many of whom are working at Yahoo! precisely because they don’t want to work for a company like Microsoft.

Could this be the deal that launches a thousand Silicon Valley startups? There’s no shortage of creativity brewing at Yahoo!. Attend any one of their internal Hack Days and you’ll find a wealth of amazing ideas and side-projects just waiting for the right opportunity. How many of those could turn into successful businesses if they were taken outside the company? I’d wager quite a few. And how many of those could turn into the Next Great Thing?

There’s bound to be at least one.

I have no doubt Steve Ballmer and the rest of Microsoft have examined every conceivable financial outcome of buying Yahoo!. I’m sure they’ve given great thought to how the two companies will combine their infrastructures. I’m sure there has been much talk of “synergy.” But as it’s become increasingly clear that Microsoft just doesn’t get Web 2.0 and the disruptive power a social network can wield, I wonder if they understand the implications of a thousand new startups — each working in parallel to finish the job that Google started.