Competition Isn't War

from the scorched-earth dept

Ben Worthen theorizes that Microsoft is acquiring Yahoo not to increase its own profits but to damage Google. Worthen is suggesting that by slashing prices for its ads, Microhoo could "chip into Google’s profit center," slowing down Google's expansion. I haven't talked to Steve Ballmer about this, but I really doubt this what he has in mind. In the first place, it's not clear that aggressive price-cutting by Yahoo! would even hurt Google that much. Aggressive price-cutting only hurts your competition significantly if you've got enough inventory to satisfy the market at the new, lower price. But Yahoo! has significantly fewer eyeballs than Google, so even if Yahoo! gave away its ads for free, there would still be a lot of unmet demand that Google could cater to. Secondly, trying to "chip away at" Google's ad revenue seems like exactly the wrong way to attack Google. Google has plenty of cash on hand, and its still-astronomical share price makes it easy to raise more. Google employees have told me that the limiting factor for the company at the moment isn't money but the ability to recruit new employees.

More fundamentally, the war metaphor is misleading in this kind of discussion. In a competitive market like this one, companies make profits by creating value for their customers. Especially in a growing market like this one, there isn't a fixed pie to be divided. So there's no reason to think that lowering Google's profits would improve Microsoft's fortunes. Microsoft should acquire Yahoo! if the combined company will be more profitable than they would be separately. Obviously, competition with Google is a big factor to consider, but it gets things backwards to view hurting Google, in and of itself, as a win for Microsoft.

Hide this

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: deals, mergers, value, war
Companies: google, microsoft, yahoo


Reader Comments

Subscribe: RSS

View by: Time | Thread


  • identicon
    Lorenzo, 7 Mar 2008 @ 1:28pm

    MicroHoo

    I'd speculate that the reason Microsoft wants Yahoo is all the EyeBalls Yahoo already has.

    The speculation I follow suggests that Microsoft would try and inflict its Silverlight thing on the Internet via the MicroHoo thing. Thus forcing the Internet to uses its proprietary formats resulting in the lockout of other OSs and browsers such as Unix (all flavors) and Firefox, Opera, etc.

    JMHO.

    link to this | view in chronology ]

    • identicon
      Anonymous Coward, 7 Mar 2008 @ 1:39pm

      Re: MicroHoo

      Or y'know, they're just growing their business. But hey, rationality and analysis of Microsoft never go hand in hand do they?

      link to this | view in chronology ]

    • identicon
      Jake, 7 Mar 2008 @ 4:07pm

      Re: MicroHoo

      I don't think Microsoft are quite that foolish, and in any case Mozilla, Apple and the other browser design teams would have a technical work-around within days.

      link to this | view in chronology ]

  • identicon
    Hellsvilla, 7 Mar 2008 @ 1:42pm

    History should repeat itself.

    I think google should offer to sell itself to yahoo for a nice round million. Then scream "just kidding".

    'cause that would be funny. Even if it is overly childish.

    link to this | view in chronology ]

  • identicon
    Anonymous Coward, 7 Mar 2008 @ 2:00pm

    And in other news, MS/Google Bid for Digg!

    http://www.techcrunch.com/2008/03/07/google-microsoft-bidding-for-digg/

    I really don't like where this is going-- Too much consolidation, too fast.

    link to this | view in chronology ]

  • identicon
    Rekrul, 8 Mar 2008 @ 3:44pm

    Microsoft has a long history of trying to "win" by running the competition into the ground. Back in the days of MS-DOS, MS used over-exaggerated pre-sale hype to trick people into waiting for the next version, rather than buy DR-DOS, which MS internal memos admitted was a superior product. Then they intentionally inserted code into Windows 3.11 to ensure that it wouldn't load if it detected DR-DOS. They even instructed programmers to have it display some cryptic error message, and then rigged their help line to imply that not using MS-DOS was the source of all their problems.

    link to this | view in chronology ]


Follow Techdirt
Essential Reading
Techdirt Deals
Report this ad  |  Hide Techdirt ads
Techdirt Insider Discord

The latest chatter on the Techdirt Insider Discord channel...

Loading...
Recent Stories

This site, like most other sites on the web, uses cookies. For more information, see our privacy policy. Got it
Close

Email This

This feature is only available to registered users. Register or sign in to use it.