Field Notes Inside an Integrated Communications Agency

I'm on vacation this week. I'm sipping a cup of coffee and looking out on the slopes of Squaw Valley through the living room window of my posh [I'm worth it] condo, home for a week. I told myself I would not think about work. But I'm reading the Saturday edition of the San Francisco Chronicle, and I feel compelled to address the news of the day. Microsoft is beating kids up on the playground again, and taking lunch money.

Seeking to gain a competitive edge in the world of online advertising, Microsoft yesterday made public its intention to acquire Yahoo, Inc. The goal is to position the software giant to more directly compete with Google in the online arena. At nearly 45 billion dollars, the offer, if accepted, would represent the largest acquisition in Microsoft's history. I can only imagine that tensions are high in Silicon Valley today, with the campuses of all three players within just a few miles of one another. Kudos to business strategists at Microsoft; making their intentions public is a strike while the proverbial iron is hot. Amid dismal earnings reports and a slumping share price, Microsoft hopes to play on the fears of Yahoo shareholders and investors to gain support from within. Savvy.

My knee-jerk reaction is to hate on Microsoft relentlessly. Historically unapologetic in its road-blocking of the open source movement, Microsoft's shrewd business tactics and generally crappy products are a detriment to the user-centered vision of the internet that we at Capstrat are so passionate about. I've made it no secret that I would not mourn the death of The Worst Browser Ever Made. And I would rather scrawl on a rock with a sharpened cinder than open Microsoft Word. But in all fairness, the competitive advantage that Microsoft hopes to gain with this acquisition is in the realm of online advertising - all those little banner ads in the margins of web pages that no one ever clicks on. This doesn't really seem to have any negative implications on the average user's online experience. Google currently has this space on lock-down. Yahoo has been unable to provide any sort of competition to the darling giant of the industry, and its overall feebleness in the market has had investors popping antacids for some time now. In time, Google would surely deal the death-blow to Yahoo, right? So why, then, am I so uneasy about this deal?

Microsoft's protracted antitrust battle of the '90s still seems fresh in my mind. Acquiring a competitor of the size of Yahoo is sure to catch the attention of both federal and international watchdogs. Google's impressive market share (well over 50%) will probably work to Microsoft's advantage in any sort of antitrust litigation. But then again, Microsoft's force-feeding of Windows to the global marketplace isn't winning any popularity contests, either. Much like the Superbowl and the presidential primaries, I predict lots of yelling at the television at my house as this saga unfolds.