Microsoft and Yahoo: A Story of 'Foreclosure Rage'

By Rich Devine | 0 Comments | Posted in in Search | Permalink

I recently saw a Wall Street Journal story on "Foreclosure Rage". With the increasing rate of foreclosures as a result of the sub-prime mortgage crisis, more and more foreclosed homes are left by former owners in a state of significant damage. Stories are told of punched-in walls, stripped-up carpet, intentional water damage, and locking pets in rooms to do what pets do.

This has become such a widespread problem that banks are offering homeowners incentive packages from hundreds to thousands of dollars just to leave their homes in good order before handing over the keys.

Regardless of how blame should be assigned or shared -- whether to irrational, predatory banks and creditors, or to irresponible mortgage holders that couldn't manage finances and obligations appropriately -- it's tragic to see the behavior of people as the hammer is falling. This is behavior that would never occur from homeowners able to manage their households without the threat of foreclosure.

With the drama unfolding between Microsoft, Yahoo, and Google -- I can't help but draw a parallel to "Foreclosure Rage".

Yahoo never successfully adapted to a 2.0 era centered on evolving, accessible, user-centric services -- at least not successfully enough to compete with Google. While Yahoo was the original portal, and for all purposes the orginal search engine, and the owner of what was really the orignal paid-search platform -- they were passed and lapped by Google and never really responded with any substantial competitive response.

Now Microsoft -- ever the giant, unsympathetic bank -- is poised to foreclose on Yahoo's failure to stay competitive. And like the rage-filled homeowner, Yahoo is exhibiting vindictive, irrational behavior that it would absolutely never consider were it not under threat of takeover. Of course Microsoft fared no better in their efforts to compete with Google; but like the giant bank, Microsoft has the fiscal means that Yahoo does not.

Recent comScore data credits Google with 59.2 share of search queries, Yahoo with 21.6, and Microsoft with 9.6. In response to Microsoft's acquisition efforts, Yahoo has decided to rip up the carpets and test an "ad partnership" with Google. Keep in mind this is only months after Yahoo's launch of a brand new search platform that cost the company more than two billion dollars.

Now, what would amount to a Google query share of at least 80 percent, won't really be the case. The initial test only calls for Google ad serving across three percent of Yahoo's search results. Still, there has to be a rev-share involved, and I can't see how this arrangement would benefit Yahoo in any way -- either in the short term or the long term -- especially considering this two billion dollar investment Yahoo already made to better serve their own ads, not to mention the recurring costs to support their own search operations. But again, this doesn't really have anything to do with revenue or business logic. What does it matter what the carpets look like if the bank is going to take your home anyway, right?

Clearly, Yahoo would never be so willing to giftwrap three percent of its query share to Google under normal conditions -- but foreclosure is near, the hammer is falling, and Yahoo will do some strange things to show that big bad bank in Redmond how it feels. Hopefully, no pets will be involved.