Why Microsoft's bid for Yahoo is an act of surrender

In the annals of Silicon Valley culture, this merger fight is a definite biggie. But everyone knows Steve Ballmer's real target is Google.

Published February 1, 2008 5:06PM (EST)

In the technoculture wars between Silicon Valley and Redmond, Wash., a hostile merger bid by Microsoft for Yahoo is more than just a skirmish. It's more like Germany invading Russia, or the Japanese sneak attack on Pearl Harbor. It's a big -- $44 billion big -- deal.

But not as big a deal as it might once have been. Not so long ago, tech company CEOs in the Valley lived in mortal fear that Microsoft would notice them, and then lazily crush their dreams and business models with a flick of Bill Gates' mouse. Back then, Microsoft vs. Yahoo would have been seen as a titanic struggle for the soul of the computing industry. Just the names of the two companies signified everything you needed to know. You can't get more button-down, corporate and boring than the word "Microsoft." As for "Yahoo"? Even without the silly exclamation point, the word still works as a free-spirited yodel. But when the Borg comes, the hilarity drains away. If you've heard it once, you've heard it a million times: Resistance is futile.

Except that this Microsoft bid, made at the late date of February 2008, even if it can't be considered a move made out of desperation, is at the very least a move generated by massive frustration. Try as it might, Microsoft cannot gain ground on Google -- the company that currently claims ownership of the soul of Silicon Valley (as in -- we can have fun and make a bazillion dollars). So where once a Microsoft bid for Yahoo would have been seen as presaging the long-awaited total triumph of Gates and Co. over the freewheeling Valley, now all it does is prove that winning every battle it fights is no longer a Microsoft birthright. Microsoft is playing catch-up from further behind than ever. The future requires a major beachhead on the Web. Microsoft, after at least a decade of Herculean effort, still doesn't have one. So it wants to buy the biggest one it can find.

What a comeuppance! Unable to succeed by developing a superior search engine -- even though it owns the desktop -- or better Web advertising technology, Microsoft has been reduced to buying another company that is also forlornly watching Google disappear into the distance ahead.

Steve Ballmer is betting that there are synergies between the two massive companies that will make Microsoft a more effective competitor to Google. "Putting these things together with a great integration should be quite an accelerant to progress," he told the Wall Street Journal.

That seems unlikely. Sure, thousands of companies have disappeared without a trace after being sucked into the Microsoft maw, but digesting Yahoo will be a lot harder than your average Burmese python's attempt to swallow a water buffalo. By the time the kinks are all worked out -- all the layoffs and corporate defections over, all the technological incompatibilities resolved, all the in-house office politics settled -- Google will be well on its way to conquering the next frontier.


And now, just for historical interest purposes, I present to you the full text of a blurb I wrote about Yahoo for Wired Magazine's "Electric Word" feature way back in June 1995.

Yippee for Yahoo

Ten million hits a week is a lot for any Web site. But that's how many swarm through the Yahoo Internet directory (http://www.yahoo.com/), says Jerry Yang, a Stanford PhD candidate in electrical engineering. Yang and fellow grad student David Filo created the popular directory a year ago. A nifty search engine and comprehensive listings of sites on the Web made Yahoo instantly popular.

The directory didn't really take off until it caught the eye of Netscape exec and Mosaic creator Marc Andreessen. Early this year, Netscape linked its "Net Directory" button to the Yahoo server, increasing the weekly hits by 40 percent, says Yang. Yahoo reached warp speed in April when venture capitalist Sequoia Capital began backing the service. Yang and Filo are taking leaves of absence to work full time on their new company.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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