About the Microsoft-Yahoo deal, Part 1 ( the chapter of Yahoo)

It is already not a news. But it is worth to thinking of it again.

Microsoft and Yahoo have reached a deal. Despite all the jargons used, the center of the deal is as the follows. Yahoo will hire Microsoft (through the Search Engine Bing) to run the Yahoo search by rewarding Microsoft 12% of its annual searching revenue. In return, Yahoo saves the cost of operating an independent division of Web search.

After the deal was announced, the stock market and the technology blogsphere generally questioned Yahoo's decision. Shares of Yahoo dropped 11% after the deal was announced. Jason Calacanis wrote a thoughtful article criticizing why Yahoo had made another mistake. In general I lean to Jason's main point when the lesson is told to the new startup entrepreneurs. On the other hand, however, I have a few different thoughts on this deal that I believe worth of sharing.

1) Yahoo, not a definite loser but a chance to be reborn

I admire Carol Bartz. She is definitely smart and courageous, probably more than many of us think she is. In Chinese, there is an idiom called 壮士断腕. Translate it straightforwardly: a brave man (or woman) is willing to cut his (or her) own wrist to save himself (or herself). Yes, it is painful or deadly-like to cut the wrist by oneself. If the cut is the only chance to save his (or her) own life, however, a brave man (or woman) will execute the action without a hesitate. Carol Bartz is such a brave woman.

It is pitiful. But the truth is that there have been no other chances left for Yahoo to be able to be reborn by not cutting its own wrist, i.e., the once-glorious Yahoo Search.

In his article, Calacanis made very good points on why the business of Web search was too important and too valuable to abandon. Don't make me wrong. I agree to Jason. The difference between us two is that I believe Yahoo was unable to adopt this suggestion, though in the heart it was very much willing to do so.

Be realistic. Yahoo has already lost the war of Web search. Yes, to admit being a loser is painful. But not to admit the lost is more than stupid. There has been no future for Yahoo in the domain of Web search. Why? A simple reason I have repeatedly talked in this blog: you cannot defeat Google by executing in the Google way! Yahoo is not able to invent a new schema of Web search beyond the framework Google has invented. SearchMonkey and BOSS caused a few buzz. Although being highly expected, time has proved that both the technologies are still too immature to make serious threat to Google. Moreover, for years Yahoo has developed itself a gigantic base of domains to run. Its scale can no longer sustain by keeping itself in this lost-already battlefield. The only future of Yahoo is---cut the wrist to seek for another chance of reborn.

There is a key consequence of this deal that is barely mentioned until now. By giving up the Web search to Microsoft, Yahoo no longer is a Web portal, but to become a pure online data resource producer and possibly a growing major online service producer. This is probably the most critical strategic decision Bartz has made. Why is it important? Three reasons are listed in the following.

a) Commercial Web portal is dying and has no future. By giving up Web search, finally Yahoo can jump out of the illusion to restart a new life.

Ironically, the existence of the Yahoo search consistently pulls Yahoo back to the old age, the age prior to Web 2.0. Yes, in recent years Yahoo search has invented quite a few new technologies. Among the big three (Google, Yahoo, and Microsoft) Yahoo is the one most willing to embrace the new Semantic Web technology. And so on. But all of these changes in Yahoo are tactical in contrast to strategic. The main frame of Yahoo is consistently being a major (or even the) entry point of World Wide Web, which indeed has become nothing but an illusion by the rise of Web 2.0. The sad thing of Yahoo is, however, that the illusion is ineluctable as long as Yahoo search still exists since it has become a company culture despite all the changes happen outside.

Finally, Yahoo search is gone, disappeared, in the wind. Although the link remains, it is now driven by Microsoft. In the other words, even if there were still an entry point to the Web, now it is Microsoft instead of Yahoo that holds the guidance. An old chapter of Yahoo finally ends.

b) By starting a fresh new chapter, Yahoo has great chances to win back its old-time glory.

Don't be confused. Yahoo has never been lack of innovation in new technology. This is a key distinction between Yahoo and some other losers, such as AOL. Jerry Yang is consistently a great visionary, probably often too ahead of the time, however. Yahoo engineers are superior too. The invention of SearchMonkey and BOSS (and many others) continuously proves so. The real problem is as we just discussed, Yahoo is trapped into an unrealistic illusion that may eventually lead itself to nothing but collapse. By cutting the wrist, however, Carol Bartz forces Yahoo to wake up from the illusion. The surgery is so painful that Yahoo can dream no longer. Once it truly wakes up, however, I bet the future of this innovative company.

c) In the new chapter Yahoo may become a great online producer of linked data, and thus eventually leads the technological innovation again.

Producing easy-to-link and feasible-for-search data is becoming a new realm of business. Soon it can grow to be as large as the domain of search or even greater. Linked data, especially when linked data is going to be integrated into the social networks, will release tremendous power on wealth production. Essentially, it will weave scattered individual intelligence into the aggregated engines of intelligent production. Because of human creativity, we may aggregate the linked intelligence in ideally unlimited ways. Therefore, a tremendous force of new-age jobs is assembling. By leaving the lost battlefield of Web search, now Yahoo has a chance to write a fresh new page in history, especially when Yahoo has already been one of the biggest (or probably the biggest) online data resource producer for long time.

From the beginning, Yahoo addresses itself a data producer in contrast to Google positions itself a link producer. This essential difference failed Yahoo in the battle against Google. This same difference, however, may eventually save Yahoo from the lost and re-rise being stronger. I believe Carol Bartz had visioned it and I wish her all the best in the journey she will lead Yahoo into the future.

If Jerry Yang was the father so that Yahoo was born, I wish Carol Bartz be the mother through whom Yahoo would be reborn!

This Microsoft-Yahoo deal is an important moment in the evolution of World Wide Web. In the part 2 and part 3 of the post, I will continue my thoughts on this deal, but on the chapters of the other two companies involved---Microsoft and Google.