Yahoo's Open Strategy could make the company the weapon Microsoft needs for social network dominance.
The gross attention financial analysts and the media are paying to
Microsoft's offer to acquire Yahoo is detracting attention from
arguably one of the most significant announcements the embattled
Internet company has made in years.
In announcing YOS (Yahoo Open Strategy) April 24,
the company has unveiled its intention to "rewire" Yahoo to be entirely
open and is looking to be the champion social network at a time when
social media is transcending the way the world communicates and does
Yahoo wants to mash up its search function, tools and profiles,
allowing developers to rework what is essentially a lot of siloed
content and contacts-into a more seamless network.
For example, in this network, users will be able to e-mail each
other from their Yahoo inbox, post pictures and update their statuses.
Moreover, users will be able to add applications to their Yahoo mail,
Sports, My Yahoo pages and pretty much anything else on the site.
Think Facebook plus Google Gadget-type apps rolled together into a
personalized, super dynamic page. Such an effort, if properly executed,
could help Yahoo boost its user base and traffic. Combine that with a
successful implementation of the company's forthcoming AMP and Yahoo
could sport some significant ad sales growth.
"Yahoo OS, if it became reality, could help the company to become a
viable competitor for Google once again in the long term," IDC Analyst
Karsten Weide wrote in an April 25 research note.
If this effort succeeds, Yahoo will have broken down the barriers
between its 500 million-plus users, allowing them to communicate and
collaborate for work and play. Yahoo would then easily be the largest
social network in the world, dwarfing MySpace and Facebook combined.
Moreover, it will be completely open. Given Yahoo's recent pledge to support OpenSocial,
it can be assumed that Yahoo will do this with the open-source
OpenSocial APIs, which allow content built on one social network to run
on another OpenSocial-based network.
This is great news for Yahoo users, right? Sure, but you wouldn't
know it because all anyone is talking about is Microsoft's vow to take
its offer to Yahoo shareholders-that's a shame, because Yahoo is onto
If Yahoo unveiled this a year ago, would it have precluded Microsoft
from gunning for the company? That's hard to say. It certainly would
make Yahoo that much more attractive. However, it also might have
enhanced the value of the company, pricing it perhaps not out of
Microsoft's range, but more than the $31 per share offer Microsoft is
currently willing to pay.
So now we have quite the pickle. Yahoo wants to become a super
social network and Microsoft wants to devour Yahoo. So let's take the
next leap, which is where Weide and I disagree. Weide suggested the YOS
could convince shareholders that Yahoo is plenty valuable as an
"Yahoo will only be able to realize its new 'open' strategy if its
stockholders can be convinced by it to not sell out to Microsoft,"
Weide wrote. "It is a self-fulfilling prophecy: Only if stockholders
believe in Yahoo OS will it become reality. If they don't believe it,
they will most likely sell to Microsoft. And under Microsoft, the
future of Yahoo OS is very much in doubt."
If Microsoft succeeds in purchasing Yahoo in late 2008 or 2009, I believe it will let Yahoo pursue its YOS plan.
Then, if Microsoft successfully integrates the Yahoo user base of
Web mail, instant messaging and content users with its own cachet of
millions of Live Mail, Live Search and Windows Messenger users, the
software giant would have more than 1 billion users, becoming the
dominant social network.
Further, if Microsoft leverages the combined search and mobile
assets with this super social network, it could seriously challenge
Google's online ad supremacy. This wouldn't happen in a year, but more
like three to five years. That will be a championship bout for the
ages-a punch-counterpunch epic between Google and Microsoft.
Speed and execution will be the key, because while Microsoft is
figuring out how to appropriate the Yahoo assets, Google will be
innovating new ways to keep ahead.
In the meantime, Steve Ballmer and Co. has yet to declare whether
they will go for the Hail Mary or punt on Yahoo. Every minute they wait
is another minute Google spends getting ahead.