Best Blog Post In A Long Time

I totally agree with Tim O’Reilly’s post about Microsoft/Yahoo! and the web as a platform. If you care about the web, where it is, and where it’s going, you need to read it in it’s entirety. It’s awesome.

I’ve been saying for months that Microsoft should not buy Yahoo!, that Yahoo! should outsource its search to Google, and that Yahoo! should get leaner and meaner and focus on the things it does better than anyone else on the web. I’ve said this so much that I can’t link out to all of the posts where I’ve argued this point, but here is my opening argument on the subject.

Here are some great one liners from Tim’s post:

Microsoft was once motivated by its own Big Hairy Audacious Goal:
"a computer on every desk and in every home." They achieved that goal,
and ever since, they’ve drifted. Now their only goal seems to be to
stay on top of the heap. They need to stop focusing on eating other
people’s lunch and start thinking deeply about what kind of goals might
stretch the company once again.

I believe that we’re collectively working on an Internet Operating System,
and that it will ultimately look more like Unix than it looks like
Windows. That is, it will be an aggregate of best of breed tools
produced by an army of independent actors, all playing by the same
rules so that those tools work together to produce a whole greater than
the sum of the parts.

Fighting over search is a bit like the Free Software Foundation
re-implementing cat, ls, sort, and all the other Unix utilities that
were already available in the Berkeley distributions of Unix.

While they [Microsoft] are locked in penis envy, all the really cute girls are going out with startups 🙂

This is the real Web 2.0, the web as platform.  Search and its advertising economy is only one subsystem of that platform.

Imagine an iPod where you could only buy music from the Apple music store instead of ripping your own CDs

Above all, remember that great companies have "big, hairy audacious goals."

Amen Brother

#VC & Technology

Comments (Archived):

  1. Geoff

    Thanks for the link Fred – I agree,it was an excellent post my favourite “Apple owns key elements of the stack, but it’s a permeable stack, and getting more so.)” Love that – far better than water tight systems.

  2. WayneMulligan

    Fred,Regarding your thoughts on Yahoo! outsourcing search ads to Google, I can’t help but wonder what type of anti-trust issues will arise from this. What would Google’s share of search-based CPC ads be at that point? I’ve heard people make the argument, “Well, Microsoft owns the majority of the PC operating system market”, but we all know how that story is playing out now that there’s viable alternatives.In your opinion how could a GooHoo solution work considering what that might due to the competitive landscape in the search advertising space?-Wayne

    1. fredwilson

      I think its going to happen whether the regulators like it or not. It seems to me that google has such advantages now and the only way to handicap them would be to do things that would be bad for users/searchers and advertisers/keyword buyersFred

      1. WayneMulligan

        I was thinking something more along the lines of making Yahoo’s search ads competitive to some degree. Meaning, don’t just “give” the business to Google, but allow them to compete head up with other players in the space (thinking more about future players in this space) — whoever does the best job (monetization, etc.) gets the placement on Yahoo’s pages.Because at the end of the day, if any one player in an industry wields that much power, I personally feel that it will stifle competition and innovation over the long term.-Wayne

        1. fredwilson

          I think the key to partnering with google, for yahoo at least, is figuring out how they can still be a player in search monetizationFred

  3. rick gregory

    His followup post, just put up, is equally good. My favorite line:”If Microsoft and Yahoo! want to compete with Google, go where they aren’t!”I’m reminded of McNealy at Sun and Noorda at Novell becoming obsessed with toppling Microsoft rather than in building successful businesses that used what they did well.

  4. Mark Collier

    I think the biggest fallacy is that you can buy market share online, as illustrated by the use of the term “real estate” for something that is so obviously fleeting and ephemeral. This has always led to bad M&A decisions from the online giants, but it’s even more foolish in search when you consider that many searchers make a choice to use google every day and could change that at any time! Browser chrome (starting with FF) has changed that somewhat, but regardless the switching costs are laughably low for users.I agree with Arrington (… that it’s early days in search, so I do think we’ll see a successor to google in the search game. But, predicting when and how and whom is literally impossible. Quick plug for a book I just read called The Black Swan which talks about how hard such innovation is to predict. Moreover, it’s not just the innovation itself but rather the adoption that is subject so such cultural whims that a command and control top down organization like MSFT is exceedingly unlike to accomplish it from within. It’s going to come from one of thousands of start ups that will take a stab until one hits upon not just a better product, but the timing, luck, and buzz that characterize the early life of google (not to mention myspace and facebook and… dare I say twitter?).This is why I think MSFT should put a few billion dollars into a fund that seeds start ups to go after google. How about taking the top 5k universities worldwide and funding 10 teams per, $200k a piece and unlimited infrastructure for 3 years. First one to 10% market share and 10% month/month growth rate gets a billion dollars and a space flight. I’m sure these numbers are all wrong, but the point is the same: the next big thing is going to come from one of thousands taking a swing, and if you only bet on one your odds are incredibly small, no matter how well funded you are (in, perhaps, in spite of it).I do agree with your general thesis, though, that MSFT shouldn’t be focusing all of it’s energy on Google / Search when there are so many other areas to innovate.Full disclosure: I work for Yahoo! and am just espousing my personal opinions.

    1. Nate

      Totally true. You can’t buy market share online, you can only earn it. Shrinkwrap software could lock people in because it triggered the “sunk cost” customer reflex. On the web however free alternatives are a click away and a company that tries to “own” your data will only get excoriated by bloggers.Like O’Reilly I wrote about Microsoft floundering since they achieved their “on every desk” mission. What’s good about Google’s mission is that it can’t ever be achieved. They’ll never run out of new information to organize.Oh, and Yahoo’s finished. Microsoft’s nibble is like the Great White wounding a seal before closing in. Rumors of acquisition or layoffs *immediately* paralyzes a company. Everyone starts looking for jobs or they sit around waiting for a severance payday.

  5. greggdourgarian

    Memorial Weekend and MIcrosoft is dying again? Sounds like someone needs to spend less time on Slashdot and more time on the golf course.Sometimes it seems half of Silicon Valley got off the time bus in 1997 with this James Collin’s claptrap about Microsoft not having audacious goals. Disclosure: I don’t work for microsoft but they help me make a lot of money.Eat the Silverlight dust, Google:

  6. Steve

    Fred,Tim’s post created quite a debate, and I’m one of those who disagree.1) “While they [Microsoft] are locked in penis envy” – Microsoft are threatened by Google and they should be.2) Where would search be in 5 yrs if everybody else just gave up? Prob the same as it is now. Are we content with the way search is? I don’t see why Google would try hard on making search better if they are the only player. One might argue: don’t worry, some startup will come up with a better idea some day. But then again, Google would probably kill off (by acquiring) whichever search startup that they find as a potential threat. Think about this, Yahoo had a chance to acquire Google way back. Aren’t we glad that they didn’t? Think about the chip/processor world without AMD. Competition is a good thing and we seriously need a formidable (or any) competitor to Google. If you have AdSense on your blog, do you really know why some month you make less and some month you make more? You don’t know and you don’t bother asking. Because where else can you go?3) Google is a two-class publicly traded company. Between the co-founders and the CEO, they have total control of the company. Without any competition at all, they would just sit there, collect money, and work on their ambitious space project…and none of us can do anything about it. Be careful what you wish for.4) Innovation comes from competition. Competition is for money (money envy, not “penis envy”). That “Internet Operating System” will be very buggy if one guy makes most of the money (sounds familiar?).I’m a shareholder of all GOOG, MSFT and YHOO. I’d likely gain more if both Yahoo and Microsoft gave up their search to Google. But for competition and innovation, we should all hope that won’t happen; at least Microsoft should fight on. I think Tim sent a wrong message there.

    1. fredwilson

      I am all for competition, just not from inept big companies that have shown they have no clue how to beat google at searchFred

      1. Dasher

        Outsourcing ad monetization may or may not be the rght move for Yahoo. But for advertisers and publishers it s a bad thing. Without competition Google will have very little incentive to keep it honest and fair. I think Google adsense is a very inefficient and non transparent system (from publishers pov) and they are ripe to be disrupted by someone.

  7. zachlandes

    O’Reilly’s post today that is a follow up to the Microhoo post adds immensely. I recommend everyone check it out.