Strategic Thinking

Yesterday's unsolicited bid for Yahoo! by Micro$oft probably does not mean anything close to what the media would have everyone believe. Although this is not precisely a new possibility — rumors have floated of MS bids for Yahoo! for a couple of years now — the markets and the media are being forced to confront some possibilities... and are being perhaps willfully blind to others.

This probably isn't about a strategic partnership, or about integrated services. It's about media consolidation and antitrust... and it is primarily pointed at preventing something else.

The real hint here is this: Micro$oft already knows that it won't get European approval for any such purchase. What, then, is the target? One cannot be certain, of course, unless one was in the relevant board meetings (and I certainly was not!). One major candidate, though, has to be Google's pending purchase of DoubleClick. Unfortunately, the Justice Department is laying down on the job on Google/Doubleclick, probably because it misdefined the "relevant markets" (yet again). It's been just long enough since the last major DOJ clearance announcement — about a month — for all of the necessary consideration and behind-the-scenes setup.

Micro$oft may be hoping one or more of several things happens:

• Google, in its rush to oppose Micro$oft's purchase of Yahoo!, says things that will force the DOJ to reexamine its nonopposition to Google's own purchase
• The DOJ will reexamine that nonopposition on its own
• The EU will be tipped off on additional ways to question the Google/Doubleclick transaction
• Google will get tunnel vision and not notice that Micro$oft is up to something else — as a hypothetical example, a new "security feature" in an OS update that cripples GoogleDocs because "GoogleDocs is just another online program asking for OS-level access, and that's a biiiiiiig security risk"

Or there may be something else at work entirely. Or, of course, it may be a real bid, too. My point is just that a bid of this nature at this time seems plausible on its face... but less plausible for its own value than as a tool for other purposes.

Much to my nonsurprise, I've seen almost nothing in any media source either questioning or even speculating upon the purpose of this bid. If there's one thing that we should have learned in the last twenty years of media and computer-industry consolidations, it's that the stated or apparent purpose of a transaction that has the effect of increasing concentration in a relevant market is almost never the "real" reason... or a sufficient strategic justification for the money and effort put into the bid process itself (let alone the bid's "value").