How Microsoft Could Compete With Google
Yahoo! is back around the $20 range again today. If Microsoft could find a way to buy them they could quickly gain some search marketshare, but presuming Microsoft builds a memorable search brand they could probably catch up through other acquisitions cheaper.
I think rather than buying another overpriced ad platform a cheaper way to attack Google would be to buy some of the leading editorial brands/sites that dominate Google's organic rankings. For far less than the $47 billion Microsoft offered for Yahoo! they could buy...
- Expedia (currently valued at $5.2 billion) and have a leading role in the travel market. I think something like 40% of internet commerce is travel.
- Monster.com (currently values at $2.24 billion) and have a leading role in employment and education.
- Bankrate (currently valued at $700 million) and have a leading role in the mortgage and consumer credit markets.
- WebMD (currently valued at $1.64 billion) and have a leading role in the medical market
- IAC (currently valued at $5.38 billion) After IAC spins off many of their other units this price might go cheaper. Google paid $1 billion for 5% of AOL. Microsoft can get 100% of Ask (with more marketshare than AOL) for not a whole lot more, giving them significantly more marketshare than they currently have and an actual brand in the search market. Plus IAC is buying Dictionary.com and some other generic high traffic sites.
- The New York Times (currently valued at $2.25 billion) and have a leading role in the news market. If they wanted to they could buy it out, spin out About.com as a Microsoft owned web property, then set up the NYT as an industry non-profit that monetizes via a longterm ad arrangement with Microsoft.
I think those companies add up to around $17.4 billion. Pay 50% over market value to close the deals and they could have all the above for $26 billion, giving them a leading position in most high value markets and $20 billion left over for marketing, branding, and buying further assets.
Is the above strategy crazy? What would you do if you were Microsoft?
Comments
Microsoft dumped a lot of "non-essential" parts of their business - Slate, Expedia, Carpoint, Sidewalk (which became Citysearch), etc. I think it would take a serious shakeup in the executive ranks to get them to reverse their thinking on this and become a Yahoo!-style "portal" again.
It's also tough at MS because you've got a lot of hubris and back-patting in the upper levels. Executives who just had 7 record beating earnings quarters in a row are hard to convince that they're thinking about things all wrong. Their search share may be slipping and dying, but the software side of the business is kicking a lot of tail.
I was not suggesting that they make everything into one portal...I was suggesting they use other premium brands to get premium ad inventory and exposure for their brand...like how Ask.com search is available on Ticketmaster, etc.
If they owned the best content sites in the high money vertical than they not only win search marketshare, but they could also build out a strong content network for ads, which is something Yahoo! is not strong at now anyhow.
That was my take on MS as well, at the entry level they admit their need in the search space, but when you sit down with a VP they could care less about hearing anything other than echoes of their own dominance.
As far as I can tell, it's all about "live" for Microsoft a developing their Office suite and OS so that it's more and more a part of the Internet experience.
P.S. Aaron, from my RSS reader, the link to this page was 404'd, then required a login, then given access denied... a wacky trail that I solved by just going to /blog. Chance are other users are being stymied, though. ;)
Well... i work in travel industry and after the results showed up in Google trends i made investigation of Expedia's revenue (i think i could have done that by searching for financial results, but whatever) and this is what i have found:
- expedia.com - 600k visitors per day
- expedia.de - 150k visitors per day
- expedia.co.uk - 150k visitors per day
- expedia.fr - 100k visitors per day
SUM=1.000.000 visitors per day * 2% conversion rate and average 100 USD of provision per booking = 2.000.000 USD of provision per day ;) (sorry... this is just a rough sketch... numbers could be completely wrong)
afterwards i tried to book vacation there. sure thing, i am in travel industry, and work as SEO... i had trouble finding and booking accommodation. in my sense, expedia has yet to work on giving boost to their conversion rates, since this booking thing is not a thing you should undervalue (and i know what i am saying, our websites have conversion rate of round 4% and i am still not satisfied)
so... (this is speaking only for expedia) if MS decides to buy them, they could quickly build a better website and boost their revenue from it, since, especially in Europe, complete travel market is still growing fast (in 2006. European travel market was worth 40 billion EUR)
So Aaron, your solution for MS is really a good option ;), and i fear that Rand here is not wrong at all... but travel business is long term milking cow... cash flow is fast and predictable and i believe MS wouldn miss with that one
This is why I subscribed to your feed, you have great ideas, I think this would be great for Microsoft, if only they also subscribed to your feed they would be in a much better position and have better leverage in the market.
I agree that vertical search will be something that will grow and can be a potential google killer.
Aaron what you said makes a lot of good financial sense. I feel perhaps the guys at Microsoft have become fixated with the idea of competing or beating Google in a market, traditionally, they lack experience or expertise. Microsoft, historically speaking, have been successful, and IMO are becoming a failure where the search market is concerned.
Rather than evaluating weaknesses, and opportunities to improve brand awareness, or possibly just to throw money at hard-core advertising, Microsoft instead is trying to solve the problem through company acquisition.
Hardly the strategy you would expect from a company with whom innovation has become synonymous during the past 20 years.
Good Post (newbie)
Maybe they could buy up browsers to increase their distribution. If they bought Firefox and Opera, along with IE and made Live the only available option for the search bar (not sure about anti-trust violations), that would gain a lot of market share very quickly. People are lazy. Even if they prefer Google, if Live is easier, they will use that.
In my opinion, buying content websites would not help MSFT to fight against Google. What I think they need to do is to invest even more into the basic search...they need competitive search engine no matter what.
Their relevancy is not perfect, but they can catch up in many ways in time on that front...what they really need is a brand people care about, and enough marketshare to ensure ad quality is high and that they have leverage over sites that break their search quality guidelines.
far all that we find more imformation with search engine,it would not help MSFT to fight against google.
There are many hot start-ups today with great competing or add-on technology and already making inroads into search; but very few of them are playing in a fairly complex area of the enterprise search as opposed to consumer search. However, consumer-oriented search engines by Google and MS and Yahoo could be applied to the enterprise stuctured and unstructured data contents. For example, this new hot company queplix.com just released an appliance that enables any of the search engines (which, let's face it, becoming another commodity) securely combine global data from all applications into the same onebox search. This is where the future competition is.
Microsoft already bought Fast Search & Transfer, which is a leader in the enterprise search marketplace.
And that Fast deal's going really well: http://www.techcrunch.com/2008/07/03/did-the-enron-of-norway-pull-a-fast...
Aaron - normally I tend to agree with everything that you say, but think that you're way off base here. Just for a start, Microsoft used to own Expedia, so I really can't see them spending billions on buying it back.
As for the rest of the sites, Microsoft is a software business - they've shown that with their repeated inability to compete online. Buying a whole bunch of completely unrelated businesses would lead to the biggest SNAFU since AOL/Time Warner and would, I'm guessing, be very unlikely to get past the shareholders.
It strikes me that buying Yahoo is the best bet Microsoft have at this point in time, although as history tells us, we may be a bit presumptuous in assuming that Google will never be challenged...
Eek that Fast deal does look pretty ugly!
I think the next step for Microsoft should be rather looking internally to leverage their existing assets.
For example I have just completed some research on the usability of Live search and drawn conclusions from an academic model for creating a compelling experience. (You can read more here: http://blog.bwagy.com/challenges-faced-by-live-search-in-creating-a-comp...).
Microsoft have always said they are in Search for the long run so clearly are looking at the bigger picture. The question is, is there picture so big they have become shortsighted?
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