Friday May 16 2008
All times are London time
My Financial Times column this week is about Microsoft-Yahoo and the efforts of technology companies to revolutionise the selling of display advertisements on the internet. I am sceptical. You can give your views below.
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I am the FT's chief business commentator and this blog is about business, finance, media, technology and related matters. I live in New York so there is a bias towards US topics but I range more widely. Comments and criticism, which hopefully are at least as interesting as anything I write, are welcome. There is more about me on my columnist page.
John,
It seems that in the Google-Yahoo-Microsoft dilemma there is a much easier solution than selling the farm. “If you can’t ‘beat them – join them”. As a case in point, in the late 90’s Steve Jobs was having difficulty getting past some significant challenges with the MAC. Supply chain, purchasing power, logistics and market share was 1-3 percent as a result of the variables that contributed to the instability of the channels that allowed for growth.
Steve Jobs ‘fight’ with Bill Gates and Microsoft was absurd. Steve had stolen the GUI from Xerox who had made the MAC ‘user friendly’ and Bill stole it from him. What Genius! So Steve does the ‘smart’ business thing and capitulates that he will never have the purchasing power for the chips that differentiate the Mac and realizes that there is still enough ‘capital difference’ in MAC ideology, software and user interface friendliness to keep an identity as a competitive device.
The fact that the MAC had 100 times more software titles but very few programmers and support from the development community as a result of the small market of the MAC and the cost dies-incentives of an extremely expensive contract development community meant that there needed to be a cost basis equalizer.
Jobs capitulation to use the Intel chip and Gates allowance of a windows platform software interface to extend to the MAC gave Jobs the capital he needed to survive and move forward to IPOD’s 70% market share fame. A Fee sharing agreement saved the day.
Yang can do the same without monopoly implications. If Google wanted to increase revenue, penetrate 70% of the market-space with Ad Sense and other behavioral technologies, all they have to do is not compete.
They automatically increase ad viewer-ship and real estate, aggregate a large percentage of the net and extend capabilities to create economies of scale. No monopolies required.
Microsoft has been a ‘me-too’ proposition that has not executed well on everything from WebTV to “me too’ web portals and email. Their success has been in brand name recognition and the war chest of money to throw at creating Xbox type technologies to operate at a loss for years, but is funded via Microsoft mechanisms of monetary support not viable market forces that drive those innovations.
A finance sharing partnership by Google and Yahoo is the best of both worlds. Google get more revenue, net profits and leverage to experiment with new advertising technologies, Yahoo survives as a separate entity and user revolts like that at Apple of the announcement of the Intel chip fade away into the history books of time. Users really don’t care; they just want results and consistency.
If Apple could go from selling their hardware for twice as much as a PC compatible and acquire the benefits of economies of scale on their hardware and operating synergies, Google and Yahoo should surely be able to do the same.
Posted by: Tim Trevathan | February 7th, 2008 at 7:41 pm | Report this commentnice post
Posted by: Ankur | February 17th, 2008 at 11:46 am | Report this comment[…] other day, I described my scepticism about advertising networks on the internet and whether technology would replace the traditional […]
Posted by: FT.com | John Gapper’s Business Blog | The diminishing returns to advertising | March 4th, 2008 at 11:28 am | Report this comment