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Microsoft-Yahoo! and Sarkozy-Bruni: Model Marriages Old and New February 3, 2008

Posted by davidzweig in technology.

For years, Jeff Jarvis has been writing cogently about evolving internet business models, most recently at his blog buzzmachine.

He has a new post that delivers an interesting take on the unsolicited attempt by Microsoft to acquire Yahoo! Just as Microsoft has been turning out uninspiring products (consider Vista vs. iPhone) and running much more on royalties than creative juices, Yahoo’s model hasn’t much changed in 10 years, unless you account the retirement of the search taxonomy to the basement to be a major overhaul.

Google, by comparison, is 21st century: Google Apps, the Cloud, Earth, and the new Social Graph API, to name just four innovations, represent a transformative future vision. Google has the clash and clout to make a good run at extending its dominance in othe critical areas. Jarvis makes the point that Microsoft and Yahoo! represents the merger of two aging business models. Neither partner will rejuvenate the other. Yahoo! is sort of like Liz Taylor; Microsoft is marrying it for its eyeballs.

This same week, French President Sarkozy was hitched to a rather newer model. Based on her history and provenance, this will likely not endure as long as the putative Microsoft/Yahoo! troth, but surely it will be more interesting to watch.

Yahoo, I’ve long argued, is the last old media company, for it operates on the old-media model: It owns or controls content, markets to bring audience in, then bombards us with ads until we leave. Contrast that with Google, which comes to us with its ads and content and tools, all of which I can distribute on my blog. Yahoo, like media before it, is centralized. Google is distributed.

It’s appropriate, then, that Yahoo is being bought by what one could say is the last old technology company, Microsoft. For Microsoft still operates on a model of control: closed in an open era. They will get along well together.

This is not a deal about content. At an entrepreneurial conference in New York this week, OnMedia, a venture capitalist said that the “perceived value of content is approaching zero.” That’s a kick in the kidneys to us content people.

No, this is a deal about audience and advertising. After the big guys consolidated all the ad networks they could — aQuantive to Microsoft, Tacoda to AOL, Doubleclick to Google (the EU willing) — next they’re buying up audience in bulk. That’s what Yahoo is, really. They call it a firehose: people in bulk, us as masses.

The reason this is happening is that advertisers and their agencies are still stupidly treating and buying us as masses — they want everything to operate like the one medium they understand: TV. (This is why, in the U.S., even as television’s audience shrinks, the rates paid for advertising continue to increase — because, oddly, the decrease in audience is creating a market scarcity in commercials’ reach).

This is just as well for Yahoo, which had no strategy, really. They’d gone as far as they could with the old-media model, as exploited by the last CEO, former movie-studio head Terry Semel. Yahoo cofounder Jerry Yang started saying the right things about turning Yahoo into a platform, but it probably would have taken years to turn his culture around. They were too used to operating like a movie studio or publishing house.

Will this be big enough to beat Google? No, because big won’t win in the end. Open will.

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