Microsoft's New Dilemma After Yahoo

by , 4:25 PM EDT, May 7th, 2008

Now that Microsoft has elected to walk away from the Yahoo deal, Microosft has wasted a lot of time and is simply back to doing with its own money what it couldn't do in the first place, according to Danny Sullivan at Search Engine Land.

"Three out of four major ratings services now report Microsoft to have a single digit share of the US audience. Microsoft hasn't even been able to challenge Yahoo (still in low double-digits), much less Google. In desperation, Microsoft signaled its defeat by proposing to buy Yahoo and get into the number two spot by proxy," Mr. Sullivan, an admirer of Microsoft, wrote.

The problem was that Yahoo cleverly poisoned the deal by wedding itself to Google in a way that would defeat Microsoft's intentions. That was annoying to Microsoft, and Mr. Ballmer had all kinds of threatening things to say. In the end, Microsoft had to walk away faced with that prospect.

The lingering problem is that Microsoft has little recognition in the search world. "It literally has no brand," Mr. Sullivan noted. "Relatively speaking, virtually no one knows what Live Search is (more actually use MSN Search) or who is behind it (Microsoft, by the way), nor does Live Search have widespread adoption."

In the end, Microsoft wanted to buy success, and when that didn't happen, the company has apparently elected to go it alone in search while Yahoo is free to improve on what they already do -- with no OS to protect.

TMO notes that Microsoft virtually had to firmly walk away. Their only hope is that the share holders will be so upset with Jerry Yang that they'll replace him when, and if, the company's fortunes don't improve. Then Microsoft can come back and save the day. That is, if the relationship between Yahoo and other players hasn't already changed inalterably in the meantime.