The Deipnosophist

Where the science of investing becomes an art of living

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Location: Summerlin, Nevada, United States

A private investor for 20+ years, I manage private portfolios and write about investing. You can read my market musings on three different sites: 1) The Deipnosophist, dedicated to teaching the market's processes and mechanics; 2) Investment Poetry, a subscription site dedicated to real time investment recommendations; and 3) Seeking Alpha, a combination of the other two sites with a mix of reprints from this site and all-original content. See you here, there, or the other site!

10 May 2008

Top of the hill

Many observers, in my opinion, had entirely the wrong understanding re Microsoft/MSFT's bid to purchase Yahoo/YHOO; not so much the change for either Microsoft or Yahoo, or even MicroHoo (the combined entity), but the effect on Google/GOOG.

Would the creation of MicroHoo (call it whatever you wish) provide competition for Google? Would Google lose its way, while it devoted company resources to fending off this new challenge?

I believe Google hoped and preferred Microsoft to focus its attention on this proposed buyout and merger, if successful, for as long as possible. This would clear the way for Google's continued successes. And a widening lead ahead of its primary competitors.

Sure, Microsoft and Yahoo are also-rans in online advertising, but the space grows so rapidly there remains room for several worthy competitors to keep the game... honest. Distressingly, I learn that Google's reliance on algorithms rather than humans irritates many of their clients and even their advertisers -- albeit, of the mom & pop variety -- who decided to spend their advertising budget elsewhere; a reality that seems to trouble Google little, if at all. Yes, as corporate advertisers (especially those companies with a national footprint, and thus huge advertising budgets) move online, attracted by the comparatively low CPMs, Google's revenues remain sky-high. And growing. But that all is a topic for a different post.

Meanwhile, no surprise that I enjoyed
Rob Pegoraro's Washington Post article...
"Microsoft and Yahoo have often failed at that goal, in part because they've distracted themselves so often with big-picture strategic shifts. Microsoft has shuffled brands -- MSN, .net, Windows Live, Live Search -- for mysterious reasons, confusing customers in the process. Yahoo has wasted billions of dollars on acquisitions of smaller companies that it fails to capitalize on (anybody still use GeoCities?), like a kid who can't stop himself from breaking his new toys before he gets out of the store. So before Microsoft and Yahoo start talking about a recast merger or any combination with other Web firms, they ought to tend to more basic tasks. A few humble suggestions..."
I believe you, too, will enjoy Rob's article. Please share your thoughts after you read it.

Full Disclosure: Long Google/GOOG.
-- David M Gordon / The Deipnosophist


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