Microsoft is no longer interested in buying Yahoo! but remains open to acquiring the company's search business, according to press reports and statements from Microsoft Chief Executive Steve Ballmer.
Too bad—at least for Microsoft (MSFT) shareholders. Buying Yahoo (YHOO) would block the company from attacking Microsoft's desktop franchise.
Yahoo? Attack Microsoft? That's right. The prospect of Yahoo trying to erode Microsoft's lead in applications for the desktop is a lot less far-fetched than either company beating Google (GOOG) in the search/advertising market (much of the reason Microsoft went after Yahoo in the first place).
Making the Most of Page Views
As some prescient commentators have guessed, the only strategy that might possibly make sense in a Microsoft-Yahoo tieup is to give new life to Microsoft's desktop franchise by moving it online in a big way. Yahoo may lag hopelessly behind Google when it comes to searches, but it has a huge advantage in page views per user per day—12.6 vs. 7.4 for Google and 2.1 for MSN. Yahoo e-mail largely accounts for this leadership, and then there are all those sites perused by wandering eyeballs: Yahoo's pages devoted to finance, news, travel, autos, entertainment, etc. Yahoo attracted half a billion pairs of eyeballs a month at the time of the Microsoft bid almost a year ago.
How, then, does Yahoo best take advantage of its great lead over Google and Microsoft in pages per day? How does it put those half a billion pairs of wandering eyeballs to better use than at present?
The answer, I believe, rests with the fact that people spend a lot more screen time creating documents than searching for things online or writing e-mail. These documents probably take even more time on average than watching videos on YouTube.
The Appeal of Adobe's Buzzword App
And few players know documents better than Adobe (ADBE). The company enhanced its appeal as a would-be partner for Yahoo in October, through its acquisition of Virtual Ubiquity and its online collaborative word processor, Buzzword. Like just about everyone else, Adobe has been going through a rough patch lately, but its long-term appeal remains undiminished.
I discovered Buzzword well before Adobe took control of Virtual Ubiquity. Clicking on a link last February sent me directly to a preview screen with a live Buzzword document. I didn't even need to sign up; I could just start typing. And it was so easy, my 7-year-old grandson could do it! An equally enticing feature of Buzzword was the ample free space on the screen. To the right of the document image is a large vertical swath of gray space constituting about 15% of the screen. Imagine monetizing Yahoo's half a billion pairs of eyeballs by filling that space with online desktop advertising!
The vast majority of corporate eyeballs are locked up behind firewalls. But Yahoo's eyeballs belong to your Aunt Sue and Uncle Jim. And guess what? Aunt Sue and Uncle Jim don't need all the features embedded in Microsoft's Home Office Suite. Aunt Sue can write her recipes and Uncle Jim can keep a record of his fishing exploits perfectly well online with just the five fonts available in Buzzword. They don't need the 300 they get from Microsoft. Same for their nieces and nephews writing book reports and term papers.
A critical question is, will Aunt Sue and Uncle Jim and their nieces and nephews mind if advertising pays for their documents? My hunch is that they won't, any more than they mind that it pays for their e-mail and TV shows. And, of course, those ads will disappear when Buzzword users print their documents.
The Advantage to Adobe
So what's in it for Adobe? A lot more than just eyeballs. Adobe needs the consumer experience only Yahoo can deliver. Adobe doesn't understand consumers because its core market is companies. Evidence of that abounds even in the new and improved Adobe Buzzword. For starters, it is buried deep in Adobe's corporate software portfolio, its individual identity lost and its consumer-friendly feel hidden by the corporate mantle. Also, it is now targeted to the very corporate users who are prisoners of Microsoft Office, and it flaunts tools and features that Aunt Sue and Uncle Jim don't even understand, such as collaborating with any number of co-authors. Worse, Aunt Sue and Uncle Jim can't see how it works without first signing up.
Does this mean that Adobe would be the same cultural misfit for Yahoo that Microsoft would have been? I don't believe so. Adobe, like Yahoo, has long built its businesses by giving away sophisticated technologies, and it boasts on its Web site of being "an industry leader in open approaches with technology."
Here is what Jerry Yang's successor ought to do immediately: Tell this story to Adobe's CEO, Shantanu Narayen, and work out a merger of equals that will allow the combined companies to define and capture the emerging market for what soon will become online desktop advertising. And, yes, do it before Google does.