OurView: The Opinion Blog

May 2008 - Posts

• Why Sinofsky’s head-in-sand approach doesn’t work for Windows Live

  What happens when you take the man in charge of the world’s most-used operating system and ask him to talk about the future? Not a lot when that man is Steven Sinofsky. Ina Fried from Cnet today posted an interview she did with Sinofsky, asking him about Windows 7 and Microsoft’s plans for the future. Full credit goes to Ina for mentioning the Translucency vs Transparency memo that Mary-Jo Foley published in her book. Josh over at Windows-Connected has the translation out of corporate-speak, which in summary equates to: “i iz keeping it on lockdown, kthxbai.” The reason for our mentioning this over here in the online services land is that Sinofsky is also the chief of Windows Live. Oh dear. While we can see some rational behind his corporate disclosure policy for Windows, unfortunately we stand on the total other side of the fence when it comes to the Internet. Microsoft isn’t winning in web services. Sure stay quiet when you’re The Man, but when your social networking products are barely a footnote and search share is going nowhere, you should probably start telling users how you’re going to deliver. Microsoft isn’t making money online. Unlike Google, the Online Services Business Unit has been loss-making ever since Microsoft announced Windows Live. Sure we’ve mentioned that this is due to high-levels of investment, but what about the bloated staff numbers, continued recruitment and the total lack of monetisation plans. Softies ask yourself how many Windows Live services would get VC funding. Microsoft shareholders have a right to know how its leaders plan to turn this ship around, and frankly the silence is deafening. Perhaps the most worrying aspect about all this is a comment made at the recent MVP Summit, where Chris Jones (Sinofsky’s under-study in Windows Live) apparently said that Microsoft could learn from Apple. From what we heard, his logic was that part of the iPhone’s success was due to there being no leaks, meaning that the PR was controlled and carefully managed. I guess Chris doesn’t read Techmeme then. To help spell this out: 1. Develop products that are innovative, make money and people actually want 2. Don’t try to control the PR, viral marketing has taken off for a reason 3. Ship on time! In recent months we’ve also heard that there is a pr team ready to combat any Windows Live Wave 3 leaks, which makes me wonder why Microsoft doesn’t put them to better use and actually start working with the community and putting out positive pr. The Community Clubhouse on Spaces is a start, and any Windows Live uber-users who blog on Spaces should go and fill out this survey to take part (currently private for the time being). This movie quote is perhaps the most fitting conclusion I could find [NSFW]. Posted May 27 2008, 10:52 PM by Chris with 10 comment(s) Filed under: Corporate Strategy

• MSFT-YHOO: This time, an “alternative” to just buy search

  In the latest twist on the Microsoft-Yahoo! soap opera, Microsoft issued a statement today, announcing that they were back in the game, but this time looking to make a deal for "an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo!”.  While reserving the right to "reconsider that alternative depending on future developments and discussions that may take place with Yahoo! or discussions with shareholders of Yahoo! or Microsoft or with other third parties.” Now what the heck does that mean?  According to sources quoted by Kara Swisher, Microsoft is proposing to buy just the search ad business from Yahoo!: Sources said that Microsoft, in its long-running war with archrival Google, wants most of all to grab Yahoo’s search ad business to become a credible #2 in the important sector. Yahoo would would like to keep its online display ad business, its communications assets, including mail and instant messaging, as well as its many content properties. These are all areas where Yahoo actually excels and should have been focusing on in the first place, instead of competing with Google in search. In fact, sources said, when Microsoft was considering involving News Corp. in its unsolicited bid to buy Yahoo, it was going to own the search and search ad business, while spinning off all content and communications assets into a separate company that would also include New Corp.’s MySpace. There are a couple of reasons this makes sense.  First off, Yahoo! is between a rock and a hard place.  It MUST do something, or shareholders, including Carl Icahn, will tear the company apart in order to get fair value.  Even if Yahoo! can hold off Icahn (and there are some indications that it might be able to do that, if Microsoft were to remain out of the game), it faces intense shareholder scrutiny, lawsuits present and future, Google circling the waters smelling blood, and the Microsoft elephant in the room.  Not a pleasant way to face a business day. And in a letter to his team published by CNET News today, Microsoft President, Platforms & Services Division (edit: fixed job title) Kevin Johnson clarified Microsoft’s strategy: 1. Innovate and disrupt in search - We will disclose some elements of our plans with this week's release of search and sharpen our focus on user experience and business model innovation. The work we have done over the last 4 years on search has established a solid foundation to build upon. 2. Win targeted distribution - With this release of search, we are now ready to throttle up broader distribution initiatives. 3. Reinvent portal and deliver new experiences across PC, phone and web - We are building our new releases of Windows 7, Windows Live wave 3, Windows Mobile 7, Internet Explorer 8, Search and MSN with an eye towards optimizing and unifying experiences and scenarios. 4. Fix our online branding - Our brands are fragmented and confusing today, and we recognize a need to clarify and align our online branding. We are now driving forward to address this opportunity. 5. Win in display advertising - We have an advantage in tools, agency assets/relationships and a team laser-focused on capturing the display ad platform opportunity. As we build from a position of strength, we will increase engineering resources to drive even more innovation. 6. Build on our strengths in Europe - As measured by comScore in March, our online business in Europe is doing well. We have over 3 times the page view volume and nearly 7 times the minutes of usage compared to Yahoo!, and 68% reach to internet users throughout Europe. We will double down on our investments in Europe and expand on this strong position. 7. Expand strategic partnerships - In addition to our organic innovation agenda, we will expand strategic partnerships that increase inventory on our display ad platform, enable new paradigms in search and accelerate growth in key geographies. 8. Pursue small, targeted acquisitions - Looking forward, we will focus on small, targeted acquisitions that support our work in search, complement our value in the ad platform and help us grow scale in key geographies. Recent acquisitions including Rapt and YaData are examples of these types of acquisitions. (emphasis mine) For Microsoft, acquiring just the search business from Yahoo! would seem to fit in well with these goals.  What is interesting about Google is that while they have dominance in text based advertising around search, a market they basically created, that market may not look anything like it does today in 5 or 10 years time.  Microsoft doesn’t need to win that space, it just needs to “innovate and disrupt”, and win in the next round. Of course we may have to wait until next weekend (and wouldn’t it be fitting if this all came together on US Memorial Day weekend, thereby capping the ruination of any semblance of a real life for tech journalists?) for this all to play out, but Microsoft wants search share, Yahoo! needs to fend off the sharks, there’s billions of dollars just burning a hole in Steve Ballmer’s pocket, and left unchecked Google will just keep getting stronger.  In his letter, Kevin Johnson mentions the Advance08 advertising summit on Microsoft’s campus.  I’ll be there, and can’t wait to fill you in on what happens next. Posted May 19 2008, 01:42 AM by Kip Kniskern with 1 comment(s) Filed under: Opinion, MSFT-YHOO, Advance08

• So what’s the deal with Microsoft and Yahoo!?

  Today, billionaire investor Carl Icahn sent a letter to the Yahoo! Board of Directors, announcing his intentions to force Yahoo! to work out a deal with Microsoft.  He announced a slate of candidates who will be up for election at the annual meeting on July 3, and an aggressive plan to acquire enough stock to make sure they would be elected (and then to force a sale to Microsoft).  In the letter, Icahn pulled no punches about his intentions: It is clear to me that the board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft. It is quite obvious that Microsoft's bid of $33 per share is a superior alternative to Yahoo's prospects on a standalone basis. I am perplexed by the board's actions. It is irresponsible to hide behind management's more than overly optimistic financial forecasts. It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo's closing price of $19.18 on the day before the initial Microsoft offer. After Microsoft walked away from the deal, Yahoo! stock slid, but not nearly as far as the pre-offer price of $19.18.  Clearly Yahoo! investors weren’t ready to walk away.  First there were rumblings from large investors about ousting Jerry Yang, and now Icahn has stepped in.  While some have said that the Microsoft pull-out was a ploy, there were clear indications that Ballmer had soured on the whole idea, and that the damaged goods Yang was offering was not what Microsoft was looking for. In his letter to the board, Icahn addresses the issue: While it is my understanding that you do not intend to enter into any transaction that would impede a Microsoft-Yahoo merger, I am concerned that in several recent press releases you stated that you intend to pursue certain "strategic alternatives". I therefore hope and trust that if there is any question that these "strategic alternatives" might in any way impede a future Microsoft merger you will at the very least allow shareholders to opine on them before embarking on such a transaction. I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary. Now just to clarify, Carl Icahn doesn’t want Microsoft and Yahoo! to merge because he thinks that it will help Microsoft to compete with Google, or that it will help to guide the future of the internet.  Carl Icahn stands to make a LOT of money on buying Yahoo! shares now, forcing a sale at a higher price, and profiting from that sale. Yahoo! finds itself today in an even worse position than it was a few weeks ago.  It can try to negotiate a sale with a newly reluctant Microsoft (who may very well see a crippled Yahoo! as a business advantage), it can try and fight and or wait out Icahn, or it can let Icahn tear the company apart in order to get the best value for shareholders (ahem, meaning Icahn). As for Jerry Yang and the management team, really the only hope of continuing on with Yahoo! is to negotiate a sale, and to continue to lead Yahoo! from within Microsoft.  Yang was probably gone already, facing angry investors at the annual meeting out for his head.  Now, unless a deal is reached, it’s almost a certainty. But after this latest smoke clears, even in a best case scenario where Yahoo! cuts the bs and offers its best self to Microsoft in a deal, is this a smart thing for Microsoft to do, to buy Yahoo!? If Microsoft moves quickly (and Yang’s reluctance to deal was a major factor in the pull-out), the reasons that Microsoft made the offer in the first place still stand.  MS would get increased search share, a valuable display advertising business, lots of traffic to Yahoo! websites, engineering talent, inroads into mobile and emerging markets, and the Yahoo! brand.  These latest developments might put the acquisition in a different light, too.  Instead of Big Bad Microsoft trying to destroy poor little Yahoo!, perception might shift more toward Benevolent Microsoft helping Yahoo! out of a jam (ok, maybe not). Of course the same regulatory hurdles, questions about differences in cultures, and reluctance from the rank and file (on both sides) remain, as well.  But if Yahoo! shareholders force it back to the table, expect Microsoft to be more than willing to listen. Posted May 15 2008, 07:22 PM by Kip Kniskern with 3 comment(s) Filed under: Corporate Strategy, Opinion, MSFT-YHOO

• Live Search Design: Too many cooks?

  A new blog entry on the Live Search blog from Evan Malahy, Designer, Live Search describes the “guiding principles for this latest version of Live Search” as Simple and powerful. Human. Fast.  And maybe indeed, the new look lives up to that. However out here in the world, we don’t get to see design concepts, or PowerPoint presentations, or get to sit in on design reviews.  We only see what is presented to us.  So when new looks appear and disappear with no warning or explanation, when elements of designs long gone by still linger, and when a different set of “guiding principles” seems to be in place depending on what Windows Live page we visit, things become less simple, and certainly less powerful. This is a sampling of the current state of Live Search pages, all taken in the space of a few minutes.  While none of these pages is offensive or poorly designed, is it a common experience?  live.com home page live.com search results    msn.com home page maps.live.com  home.live.com  my.live.com Note that there are four different “search buttons”, two different “orbs” (and four different sizes), search boxes with and without subcategories (web, image, maps, etc), and 6 different banner backgrounds. One part of the problem is that without any insights or any visible strategy to go by, we have no idea whether these are works in progress, or whether some of these pages will soon (or ever) be redesigned, or if this is the work of one design team, or many, or any at all.  Some transparency would go a long way here.  If these are in transition, fine.  Just let us know what’s going on (and move fast to get everyone “on the same page”). Of course a unified search experience won’t vault Live Search up in the rankings, or make searches more relevant, or may not even be necessary at all, for that matter.  In our opinion, however, it might make for a better experience, and that can’t be bad. For a tour of elements of the new Live Search, check out http://www.newlivesearch.com/ Posted May 07 2008, 07:04 AM by Kip Kniskern with 7 comment(s) Filed under: Opinion, Live Search

• No MSFT-YHOO deal; now what?

  Microsoft just walked away from its proposed acquisition of Yahoo!, ending 3 months of speculation on what would ultimately happen.  While I have been generally supportive of the Yahoo! deal,  I was skeptical of the thought of a long protracted proxy battle.  And with Jerry Yang doing everything he could to burn and pillage the company and let Microsoft pick up the pieces, the deal became less desirable as it continued to drag on. In his letter to Jerry Yang withdrawing the offer, Steve Ballmer alludes to a potential partnership between Yahoo! and Google, one that he sees tearing Yahoo! apart.  Of course that’s only if it is allowed to happen in the first place, and Ballmer will now turn his attention to doing everything in his power to stop the partnership, which would place Google ads on Yahoo! properties.  But even if it does occur, Ballmer makes a good point that it will weaken and demoralize Yahoo!’s Panama search marketing arm.  Ballmer said: First, it would fundamentally undermine Yahoo!’s own strategy and long-term viability by encouraging advertisers to use Google as opposed to your Panama paid search system. This would also fragment your search advertising and display advertising strategies and the ecosystem surrounding them. This would undermine the reliance on your display advertising business to fuel future growth. Given this, it would impair Yahoo’s ability to retain the talented engineers working on advertising systems that are important to our interest in a combination of our companies. Certainly one outcome of the pull-out is going to be an all out attack on Yahoo!.  Steve Ballmer is going to want to make Jerry Yang pay, and the best way for Microsoft to gain share in search is to take it from Yahoo!  Yahoo! stock is widely expected to plummet after Microsoft walks, which it is bound to do on Monday morning.  Yahoo! shareholders are going to be fighting mad to see their stock return to the $19 – 20 range, and if Microsoft makes moves in other directions, making it clear that this isn’t a negotiating ploy, Yahoo! stock could fall well below $19.  Shareholder lawsuits, court battles over a potential Google partnership, a disillusioned workforce who may begin leaving in droves (assuming they can find someplace to go – down the street to Mountain View, perhaps?), and an all out assault by Microsoft all point to rough days ahead for Yahoo!  Remember that Yahoo! had been facing a year of rough days before Microsoft shored up its stock, and now that support is gone. Yahoo! has made a number of moves to reshape the company in recent months, none of them bringing much more than a yawn to investors.  A vague, too little too late attempt to turn Yahoo! into a social networking platform by offering single sign on to their current mess of services (ever hear of Live ID?), might have well sent the stock price plummeting on its own if it wasn’t for Microsoft shoring it up. As long as Microsoft doesn’t plan on coming back for Yahoo! at a lower price, and Steve Ballmer hints broadly that they won’t (“We will move forward and will continue to innovate and grow our business at Microsoft with the talented team we have in place and potentially through strategic transactions with other business partners.”), the worse Yahoo comes out of this, the better it is for Microsoft, as a significant share of the search market pie will be up for grabs. So what else does Microsoft have up its sleeve?  Will it buy AOL?  AOL is clearly for sale, at a much lower price than Yahoo!.  While it doesn’t offer anywhere near the same value, buying AOL would send a strong signal that Microsoft is not just biding its time waiting to come back and save Yahoo!  Will it make a bigger play with Facebook?  Steve Ballmer was spotted outside the Facebook offices last week.  Or instead, will Ballmer himself be on the way out? It is of course far too early to tell how this latest news will be perceived.  Certainly many at Microsoft will be relieved, this will give the troops in Redmond renewed confidence that their work matters.  While some have criticized Ballmer for making the attempt in the first place, pulling out now rather than engaging in a bloody battle that wasn’t a sure thing could be recognized as a smart move on his part.  There is of course a big danger that all of this will only strengthen Google’s dominance, but that was a danger no matter what transpired. Microsoft’s attempt to acquire Yahoo! changed the game, whether the deal took place or not.  Microsoft is serious about search and advertising, an online presence.  Live Mesh has shown that there’s more to an online strategy than text ad placement, and Microsoft will be pursuing that strategy across a wide range of properties.  A Yahoo! acquisition might have been the best shot to gain share quickly, but a protracted battle wasn’t worth the hassle, and now it’s on to Plan B.  Can’t wait to see what it is. Posted May 04 2008, 03:48 AM by Kip Kniskern with no comments