Friday, June 13, 2008

Google-Yahoo Deal

For Yahoo shareholder, they wanted to get a big watermelon a few months ago; now they only get a small apple.

The big watermelon is that Microsoft to buy Yahoo at a price as high as $37, while the small apple is that Google is going to open its ad service to Yahoo, which will bring a $250 million to $450 million strong cash flow to Yahoo's balance sheet.

Today, Yahoo announced that it ended up talks with Microsoft. However, it said it will partner with Google on opening its searching service to Google's advertising business. Reuters call it as a new model in ad partnership, while I believe that's only an apple to comfort upset yahoo investors.

In addition, Yahoo admits that its ad service based on its searching business is no longer as competitive as Google's. It may get a huge share of revenue from the deal, but the fact is that Yahoo can't do a better job in selling ads by itself.

It's interesting how similar the history looks like, even beyond the border. Over 2000 years ago, there was a small nation in China called Qin. The other five nations were all bigger and stronger than Qin. However, the Emperor of Qin is a very good strategiest. He chose to partner with one or two nations in order to fight with other bigger ones. Qin grew bigger and stronger benefiting the alliance, and finally took control of all the other five nations.

Managing a business is like governing a nation. Alliance is important, but that is not all. Yahoo may see a good deal now, but it will soon fully rely on Google's ad platform. Google will be the one who decide the percentage of revenue Yahoo can get. Yahoo needs more than a partnership to revive its business, without being taken over by anyone including Google and Microsoft.

No comments: