An admission of failure: Microsoft's bid for Yahoo!

Microsoft's proposed acquisition of Yahoo! will only end in failure. In fact, this proposal is an admission of failure.

One of the things that's often baffled me about the business world is how one struggling company will buy out another to create a bigger struggling company. The AOL and Time-Warner merger is the poster child for this.

In this case, Yahoo! is on the decline. Their publisher network is a joke while their search and directory functions have long been eclipsed by Google. The only two things that Yahoo! does well is Flickr and Yahoo! Mail.

So the only real asset Microsoft gets is Flickr and given Microsoft's abysmal track record in integrating acquisitions we can't be sure they would be able to use it properly.

The real problem is Microsoft see the future as being online but they don't know how to get there; they simply don't do online functions well. In search, Microsoft have always struggled even in their own products, let alone with net searching.

As a response to their struggles with Google, Yahoo! have 61 products. This "range bloat" is one reason why Yahoo!'s management is struggling. Integrating this lot into Microsoft would be a nightmare and Long Zhen lists 23 that Yahoo! has in common with Microsoft.

Microsoft too have challenges with range bloat. In their flagship products; Office and Windows, there are too many versions that take too long to come to market and arrive buggy.

Rather than spend 44 bn on a declining company, Microsoft would be far better to look for the next Larry Page and Sergey Brin. Put some bets on some promising start ups being run by smart young guys.

This offer by Microsoft is really an admission of failure. Steve Ballmer and the rest of the Microsoft management have admitted they have run out of ideas and rather than take the option of developing new ideas they are just going to throw money at tired old failures.

It suits me however, I'm not a Microsoft shareholder and more competition between advertisers means better deals for us web publishers and bloggers.