Mark Evans

Yahoo’s Smorgasbord is the Problem

It’s Monday, the sun is shining and it’s the first day of the New Yahoo now that the evil empire - Microsoft - has been repelled after a two-month siege.

Now what, Mr. Jerry Yang? Surely, you’ve got something up your strategic sleeve that somehow convinced the Yahoo board to walk away from a $40-billion offer. Maybe as Dan Farber suggests, Yahoo is betting its future of Y!Open that will make Yahoo an open and social platform.

Yahoo and Yang are getting all kinds of suggestions about what to do now: Henry Blodget encourages Yahoo to do the outsourcing deal with Google while Howard Lindzon suggests Yang stop blogging and focus on increasing shareholder value.

Perhaps another strategic issue Yahoo should seriously explore is whether is needs to be all things to all people. As Monster co-founder Jeff Taylor put it last week during a conversation the Communitech conference, Yahoo has an extensive service portfolio. He describes it as having “100 children”. As any parent with more than one child would appreciate, trying to manage multiple children is challenging let alone 100.

For a sense of what Yahoo is bringing to the table, check out a directory ironically called Yahoo! Everything. It features pretty much everything within the Yahoo empire that has been launched organically over the past 14 years or been acquired. The list is impressive but also daunting given Yahoo is everywhere and anywhere.

The question is whether trying to be all-things-to-all-people makes sense or works. Is it possible to effectively manage a business with so many tentacles? How do you nurture the ones with more growth potential while still keeping your other children happy?

If you want to illustrate Yahoo’s strategic challenges, let’s take a look at del.icio.us, the popular bookmarking that Yahoo acquired in 2005 for $20-million. Since then, del.icio.us hasn’t changed that much, although a major upgrade has apparently been in the works for months, and it hasn’t been extensively integrated that much within the Yahoo empire.

So, why did Yahoo buy del.icio.us other than wanting access to its millions of users? What was the strategic fit? This is just one example but I’m sure you could go through Yahoo Everything, and ask the same question for dozens of organically-created services and acquisitions.

As Yang scrambles to create YAM (Yahoo After Microsoft) maybe he needs to look at the company’s service smorgasbord to determine what Yahoo really needs to be successful. Maybe kicking a few children out of the house (e.g. closing, selling or spinning off business units) would be a good move to give everyone else more room to grow.

More: ReadWriteWeb’s Marshall Kirkpatrick has a good post looking at how your favorite Yahoo services are safe for now.

Technorati Tags: Jerry Yang, Microsoft, Yahoo

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Link Bait Alert!

No offense intended but Preston Gralla’s post - “Five Reasons Why Vista beats Mac OS X” is 100% link bait. In fact, it’s so blatant link bait that even Henry Blodget, who’s a master of link bait, would be embarrassed.

Maybe Gralla should try to come up with a more substantive list of reasons before blowing out his “list”. Reason #5, which suggests that Vista is better than OS X because of Steve Jobs, is particularly dumb.

Technorati Tags: Apple, Mac OS X, Vista

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The New OS Landscape: Real Competition

A lot of people seem surprised by Microsoft’s decision to drop the retail prices of Vista, including a whopping 30% reduction for Vista Ultimate.

“It’s sort of an odd move,” said Gartner analyst Michael Silver, while NPD Group’s Chris Swenson opined “I can’t remember a big price cut like this.”

Boys, welcome to the new and exciting world of OS competition.

Gone are the days when Windows dominated the landscape while Apple struggled on the edges, and alternatives such as Linux were embraced by a small, ultra-geeky group. Today, Apple is booming while Linux is - surprise, surprise - moving, if ever so slowly, into the mainstream. Who knows, maybe IBM will bring back OS/2 given the revival in the OS landscape!

Microsoft may have sold 100 million copies of Vista since its launch last year but even the folks in Redmond know that Vista hasn’t been a booming success from a financial, brand or technology perspective.

For all of Apple’s poking fun at Vista, the truth is consumers - for the first time perhaps ever - have real choice. Buying a Mac is no longer seen as risky if you aren’t tech savvy, a graphic designer or a student. These days, people, who would have never thought about buying a Mac, have become Apple disciples even if it has meant paying a premium for the privilege.

All Microsoft is doing by slashing the prices of Vista is being smart. If you need a better competitive position to deal with pesky, revived rivals, a quick and dirty tool is lower prices.

The question, of course, is whether lower Vista prices will work. Since its launch last year, Vista has struggled to resonate with consumers even as Microsoft has dealt with some of the criticisms. It’s particularly telling - and embarassing for Microsoft - that demand for XP is still alive and well. itComputer Canada, for example, just launched a SaveXP campaign.

If Microsoft is going to revive Vista, it’ll probably take more than lower prices. Perhaps the next version of Windows will resonate with consumers but the harsh reality is the OS marketplace has changed and there’s nothing Microsoft can do to restore Windows’ dominance.

There’s a new kid in school, and his name is competition.

Technorati Tags: Apple, Linux, Microsoft, Vista

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Quote of the Day: Steve Ballmer

The ink’s barely dry on the deal but Microsoft is already defending its $240-million investment in Facebook. Here’s what Steve Ballmer had to say at a conference in Mumbai:

“We didn’t make a mistake….,The valuation of Facebook is still to be determined. Certainly today, it’s very, very popular. So for a company like ours that wants to be a pre-eminent presence in this space, it’s very important for us…..Will Facebook be worth $5 billion, $15 billion or $50 billion some years down the line is really up to their team and how they take it forward.”

Technorati Tags: Facebook, Microsoft, Steve Ballmer

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Apples’ (and Microsoft’s) Big Day

It’s been a long time for the MacNation since the last major OS X release - 30 months - but today is finally the day for Leopard to be set free. In less the 12 hours, the ca-ching of cash registers around the world will be heard as people plop down $129 for the “biggest update in Mac history”. There will be tons of media coverage and bloggers will be gleefully pounding out posts with reckless abandon.

Stepping back, it is interesting see how the computer industry works when it comes to the release of new operating systems - and the marketing frenzy that is unleashed on consumers who feel compelled to upgrade or, if needed, purchase a new computer so they use the new OS. I remember when Microsoft released Windows 95 (using the Rolling Stones “Start Me Up” as the official theme song). It was a huge marketing campaign with hundreds of millions of dollars spend by Microsoft. Same thing for XP and Vista, although I don’t remember quite the same excitement around Windows ME.

As a relatively new Apple user, I wasn’t really as cognizant of the marketing bonanza surrounding about Tiger or Panther, although I’m sure they it was a big deal for Mac users. But with Mac being used by more people and Apple now the belle of the ball, it’s easy to see why Leopard is such a big deal. (Note: For a different look at why people are so excited about Leopard, check out Four Reasons Why).

Why is it that new operating systems are marketed so aggressively? The most answer is they generate an awful lot of revenue and, in many cases, people have little choice other than to upgrade or go out and buy a new computer with, in theory, more useful bells and whistles. Sure, many consumers are holding off - like XP users are trying to do these days - but eventually you have to step up to the new OS, which reminds of that old Fram oil filter commercial with the tag line “You can pay me now or you can pay me later”.

It is ironic that on Apple’s Big Day, Microsoft has just reported extremely strong third-quarter results, driven by healthy sales of the much-maligned Vista, as well as Halo 3, Office 2007, Windows Server and SQL Server. Mary Jo Foley writes that Microsoft has now sold more than 88 million copies of Vista - many of them premium editions (aka the expensive versions).

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The Buzz About OS X vs. Vista’s Woes

The world is abuzz with the impending release - two days and counting - of Apple’s new operating system, Leopard, which will cap off a mega-year for Apple that has been highlighted by the launch of the iPhone, a refresh of the iPod line-up, and stellar financial results.

Not surprisingly, Apple shares have soared to a record high and the Steve Jobs Aura (SJA) continues to grow.

Amid all this excitement, I’m still puzzled by one thing: why Leopard is seen as the be-all-and-end-all of operating systems while Vista was pretty much dead in the water even before it got out of the gate. I’ve read a bunch of Leopard stories - most of them bubbling with glee about the 300 news features, including Quick Look and Time Machine.

But where’s the objectivity that Leopard may simply be a nice upgrade as update? It seems the media and blogosphere has bought into Apple’s marketing campaign that Leopard is “the biggest update in Mac history” and “one OS so innovative, it will completely transform your Mac”.

Without upsetting the Mac Nation, why will Leopard will such a smash-hit while Vista has been such a disappointment. Maybe expectations are different; maybe Microsoft can do no right while Apple can do no wrong; maybe Apple has done a better job developing its OS upgrade while Microsoft made a strategic mistake by rushing Vista out the door before it was really ready.

At the end of the day, Apple’s biggest asset - at least right now - is the love affair consumers and investors have with the brand. Everyone loves Apple while Microsoft struggles do convince people it can do things right as well. Steve Jobs is seen as a superstar while Steve Ballmer, who’s a very smart guy, is regarded with far less esteem.

Like sports, momentum is everything. Apple’s on a huge roll during which it has rarely stumbled other than perhaps the decision to reduce iPhone prices by $200. Sooner or later, however, momentum has a funny way of changing. At some point, the shine will come off Apple. The challenge facing is figuring out when that’s going to happen.

For a take on how Apple is going to keep its value, check out the New York Times’ Bits.

Update: The Wall St. Journal’s Walter Mossberg has an extensive review on Leopard with this conclusion: “Leopard isn’t a must-have for current Mac owners, but it adds a lot of value. For new Mac buyers, it makes switching even more attractive.”

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Is Vista Becoming New Coke?

When Coca-Cola decided to “improve” the formula for its flagship product in 1985, it was a marketing disaster. Soon after New Coke hit the market, consumers were demanding for the return of Old Coke. After some posturing, Coca-Cola did an embarrassing strategic reversal by bringing back the old formula a few months later. While New Coke wasn’t pulled off the market, it died a slow, ignominious death.

In some respects, Microsoft now finds itself in a similar predicament. Vista is supposed to be a superior operating system to XP. Five years in the making, it is supposed to be a major upgrade over XP - much more than XP was an improvement over Windows 98.

Unfortunately, Vista is threatening to become New Coke. While Microsoft and Windows are always big, juicy targets for criticism, Vista has been given a rough ride - perhaps unfairly - by consumers and the media. Vista’s problems have not only left many consumers pining for XP but encouraging many people to stick with XP. For the billions of dollars sunk into Vista’s creation, the growing love affair with XP must be frustrating for many people in Redmond.

So what does Microsoft do? If it admits Vista is a problem child, then it cuts the knees out from under its new flagship OS and a new, high-margin source of revenue growth. At the same time, Microsoft needs to meet the needs of its consumers. If many of them want XP because it’s more stable and has fewer problems, Microsoft should, in theory, do what consumers want - something Seth Godin would likely give his stamp of approval.

While Microsoft is not going to abandon Vista, it is making modest concessions when it comes to XP. The latest move is a decision to extend the availability of XP for computer makers and retailers for another five months until June 30, 2008. It will also continue to make XP available in emerging markets where people have computers that don’t have a powerful processor and/or lots of RAM and memory. This is a significant concession even though it appears to be a minor move.

Microsoft is trying to spin this decision as a recognition “some customers need a little more time to make the switch to Vista” but the reality is many customers have no interest in Vista because they’re content with XP - at least for the time being.

If Microsoft’s not careful and continues to insist on ramming Vista into the market, do not be surprised if there is a backlash among some consumers. Much like New Coke spawned the Old Cola Drinkers of America to be organized, can it only be a matter of time before the “XP Lovers Unite” is created?

If I were Steve Ballmer, I’d play to consumers rather than force-feeding them Vista. If consumers like XP and want to keep using it, why not institute a new Windows portfolio strategy that features Vista and XP. Clearly, they play into two different markets with different needs. If you support both, it will make consumers happy and give Microsoft more time to improve Vista. If Vista gets better, XP customers will eventually migrate.

That said, I would be highly surprised if Microsoft decided to give XP more love and attention. After all, it’s an old operating system that served its purpose, while Vista is designed what for consumers need today and in the years ahead. If may take consumers some time to realize it but Microsoft is not going to abandon a product evolution strategy that has served it well for more than 20 years.

More: Mary Jo Foley wonders if XP is too good for Microsoft’s own good, including a quote from a Microsoft executive who concedes the one year phase-out period for XP may be too ambitious. Ars Technica adds one “other thing working against XP’s demise is the poor reputation—deserved or not—that Vista has begun to acquire.”

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Does it Really Matter?

A couple of big developments today - Microsoft introducing a new and improved Live Search, while LinkedIn gets really radical by giving people the ability to - wait for it - add photos to their profiles.

Question: Does it really matter?

For all the excitement about a better Live Search that quadruples its coverage range, how much of a difference will it really make in winning people over from Google? And why should anyone be excited about being able to add a photo to LinkedIn? Big deal. If LinkedIn were really savvy, they would be opening up their API as soon as possible so it can encourage people to develop cool add-ons/extensions.

Yes, you can accuse me of being overly critical. After all, the only way Microsoft is going to be able to close the huge gap between itself and Google is by making improvements. They may not be radical or work wonders overnight but if you’re going to stay in the game, even getting a little bit better is a good thing.

The big difference between Microsoft and LinkedIn is Microsoft is playing catchup while LinkedIn risks losing its stature as a leading social network for business people by not moving fast enough. The rapid emergence of Facebook’s applications shows the value of creating a large and vibrant ecosystem that only enhances the parent.

The reality is Microsoft and LinkedIn are doing what’s necessary to stay viable but neither move warrants a flurry of news coverage.

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$100M = 1% = Wow!

According to the Wall St. Journal, Microsoft has held preliminary discussions to invest $100-million in Facebook based on a valuation of $10-billion…or more. It’s astounding that $100-million would give Microsoft a 1% stake. Of course, a $100-million investment in Google right now would give you a 0.06% stake.

So what’s next? Has Facebook started an investment auction that will see Google commit to a $1-billion investment for 5%? How much cash does Rupert Murdoch still have left after buying MySpace and the Wall St. Journal?

One more thought: Does anyone in the tech world keep secret any more? Judging from leaks about deals being made (e.g. EMC-Mozy), new strategic initiative (Google’s Facebook-killer) and investments (Microsoft-Facebook), mnay people can’t help but spill the beans. Maybe this info-spillage is just a fact of life in this instant information/instant gratification age in which we live.

Update: Jeremy Toeman brings some sane thoughts to the blog-o-frenzy by pointing out that the WSJ is chock-o-block with speculation, coulds, woulds and may. Meanwhile, Mathew Ingram cranks up the speculation by suggesting Microsoft’s interest in Facebook could prompt Yahoo to acquire Facebook. Man, it’s great when bloggers get so hot and bothered! So many words, so many thoughts! Kara Swisher, meanwhile, takes a very healthy swipe at the financial fascination with Facebook, suggesting Silicon Valley is becoming more delusional by the minute.

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M&A Musical Chairs

After being outmaneuvered/outbid by Google for DoubleClick a few weeks ago, Microsoft has decided to use a portion of its mountain of cash - $6-billion to be exact - to purchase online advertising firm aQuantive. It’s the largest acquisition ever made by Microsoft, and clearly reflects a couple things: the growing bullishness about the online advertising market, and Microsoft’s desperation to grab a seat before this multi-billion dollar game of musical chairs comes to an end.

I don’t know too much about aQuantive other than it’s an excellent day to be a shareholder given Microsoft’s $66.50 a share offer is a staggering 85% premium over aQuantive’s closing price of $35.87 yesterday. Microsoft and aQuantive said they have “very complementary technologies”, which they better have in spades given Microsoft is spending some serious cash on the deal. aQuantive expected to have sales of $390-million to $405-million for 2007 - giving the deal a purchase price to rich sales multiple of about 15 times.

The acquisition comes in the wake of Google’s $3.1-billion purchase of DoubleClick and WPP Group’s $649-million deal for 24/7 Real Media Inc. With the online ad market so hot, it’s just a matter of time before the next deal emerges. If you own an online advertising firm or own shares in one such as ValueClick, it looks like you’re holding some sweet lottery tickets right now. For other views, check out Mathew Ingram, who suggests the deal reminds him of the optical-networking buying frenzy of the late-1990s.

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