Tuesday, May 30, 2006


There has been a lot of Mergers, Acquisitions and Alliances in tech, and there have been rumors of even more largely prompted by fear of Google. Fundamentally I think there are 2 markets: Advertisers/Application Providers(namely Google, Yahoo, and MSN (which I will call GYM for now)), and sellers (ebay and amazon). Mergers within these markets would be huge. Amazon and ebay would form an e-commerce powerhouse. Yahoo and Google would create a search and internet application powerhouse. These merges would give them leverage against the other camp like ebay-Amazon could negotiate volume advertising rates on Google. However mergers across these camps are going to create an unhealthy dynamic. For instance, ebay merging with Yahoo (as has been rumored) could be bad. It would be difficult for Yahoo executives to watch the ebay side funnel money into google advertising which is critical to ebay's survival. I think this overrides the fact that Ebay (and to some extent Amazon) is a valuable community, and it competes directly with Yahoo Auctions.

Beyond that the only acquistions that make sense are GYM buying applications that have strong communities, and shunning original content for user based content. Many applications can be easily replicated but require communites to work... like myspace, flickr, delicious, digg, and youtube.

Google obviously is a powerhouse, but has been reluctant to acquire other companies and has a tendancy to create their own applications even if another community has already been established(example: orkut and myspace). They have made some acquistions like blogger, but not many. I think they can take over any field where community is not imporant (search, maps), or there are standards (like email) but need to think more about acquiring where the community is so important.

Yahoo has made some brilliant acquisitions, namely overture, flickr and delicious. I have been concerned about Yahoo and their their emphasis on making original content since they hired several old school media executives, but they appear to have changed course.

Microsoft has made few good acquisitions, and whatever they acquire they will probably destroy (think hotmail). I remain bearish on Microsoft's ability to compete on the internet. From a technical perspective they will convert it to Windows which will be a major distraction and they will loose ground. Further it will make the company impossible to spin off, as it will either have to transition back to linux or pay enormous licensing fees to MSFT. Also, they have little goodwill with other businesses or consumers. They also have a culture that is spoiled, not in the habit of competing or delivering quickly, and they have no style or originality (think Origami). Also they don't have the focus that Google and Yahoo do on advertising.


I don't think it's a good idea for anyone to buy skype. It is not a clear case of buying the community. There is a community but it is tied to another community: the public phone network. Standards destroy exclusive communities. That is why google was so easily able to compete in email with gmail, but not with myspace. I think long term skype as well as vonage and any other voip play will be hard to capitalize on.

Before I bought skype or vonage I think it would make sense for GYM to buy at least the IM part of AOL for the community, not the technology. All three have their own messaging system but IM is the leader and the stronger it is pulled into the voip market the better chance it has for becoming the de-facto standard.

Other than that AOL is a dog. It's dial up business is plummetting, and original content should come from other companies. Of course there was the big deal about it's search and google, but I don't think aol has the leverage it thinks it does.

I think News corp acquisition of myspace was brilliant. Shame on GYM for not reckognizing it's potential. Bands that are on myspace have web pages that are effectively the same except without there friends. If the internet had started out with myspace written into the protocol of http, that might be the way we use it outright.

I think GYM should all be looking hard at YouTube before News corp scoops it up. It may very well replace tv as we know it. This is an example where google has built Google video instead of buying up a company that already is building the community.

I think everyone should look at digg. However, digg need to take the obvious step and extend beyond technology before someone else does.

I suspect at some point if wikipedia can't keep up it's servers someone may adopt it and add ads to the pages. Interestingly, Google is currently providing storage and hosting.

However, possibly the most brilliant acquisition of all was Google buying dark fiber. This will give them leverage against the telcos and cable companies as they try to buy the internet infrastructure and extort them.