Preston Gralla

Microsoft-Yahoo deal: The only way to save Microsoft Live

February 01, 2008 7:58 AM EST
Yahoo shareholders won't be the only winners in the proposed Microsoft buyout of the Internet portal. It's a chance for Microsoft to save its ailing "Live" brand of online products and finally succeed online.

There are too many "Live" products to count --- Windows Live (which has nothing to do with Windows), and Microsoft Office Live Small Business (which has nothing to do with Microsoft Office) among them. As a group, they're entirely underwhelming. But an infusion of a massive audience, as well as Yahoo expertise, can certainly fix the problems. And the Microsoft offer makes clear that Yahoo, after the buy, won't operate independently, but instead will be folded into Microsoft. And Live and Yahoo will most certainly combine.

Steve Ballmer's offer to the Yahoo board spells that out. He lists four areas of synergies that will come of the deal. Here's one of the most important ones:

Emerging user experiences: Our combined ability to focus engineering resources that drive innovation in emerging scenarios such as video, mobile services, online commerce, social media, and social platforms is greatly enhanced.


That certainly sounds as if the Live and Yahoo engineering teams will be combined. If you need any more evidence of that, here's another important synergy Ballmer lists:

Expanded R&D capacity: The combined talent of our engineering resources can be focused on R&D priorities such as a single search index and single advertising platform. Together we can unleash new levels of innovation, delivering enhanced user experiences, breakthroughs in search, and new advertising platform capabilities. Many of these breakthroughs are a function of an engineering scale that today neither of our companies has on its own.

The deal is more important for Microsoft than for Yahoo. Yahoo may be flailing away at the moment, but eventually, it will find its feet, with or without Microsoft. But Microsoft has never figured out a clear online strategy, and its continuing unfocused Live product line shows that it may never figure it out. The infusion of Yahoo's online expertise and massive audience could finally fix that.

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