Ballmer’s Not-So-Idle Threat to Yahoo: Do You Feel Lucky?
Several years ago, when I once asked Microsoft (MSFT) CEO Steve Ballmer about if the software giant was ever going to be able to catch No. 1 Google (GOOG) in market share in the increasingly lucrative search arena – despite years of trying and billions in investment in its Web businesses overall – he said something I shall never forget.
“We don’t actually have to catch the leader,” said the pugnacious tech leader. “We just have to surpass the No. 2 to have a great business.”
At the time, Ballmer meant Yahoo (YHOO), of course, and his intention was clear to me. While it was probably well-nigh impossible to get into the pole position Google (GOOG) is in, Microsoft could begin an attack if they could crush Yahoo first.
Easier said than done, of course, with little movement in share so far–even after early labored and expensive organic efforts, a failed takeover attempt to buy Yahoo and endless but still fruitless talks about a partnership with the Internet giant.
But now with a very credible and consumer-friendly revamped service called Bing, which is getting a big slug of marketing money, Microsoft might actually have a product that at least has a better chance to gain market share.
While by no means certain or lasting, early results from surveys are promising and–combined with distribution deals the software giant recently signed too–could give Microsoft the kind of momentum is has long needed.
This is obviously not good news for Yahoo, which will doubtlessly be the one losing market share if it is to be lost, a situation that its CEO Carol Bartz has said it could not do.
In a recent onstage interview with me at the seventh D: All Things Digital conference, in fact, she said Yahoo definitely needed to maintain its 20 percent share.
Bad news for her then, when yesterday Ballmer shot another one across the Yahoo bow, by telling a group of business execs at a luncheon:
“Our shareholders, I told them we were willing to spend 5 to 10 percent of operating income for up to five years in this business, and we feel like we can get an economic return.”
Since it is cash-spewing Microsoft – more than $20 billion in operating income last year – that’s a lot of money.
And, even if history has not been kind of Microsoft’s like-a-drunken-sailor spending before in the Internet space, there is no question the company has an obsessive commitment to eventually gain ground, grinding down companies like Yahoo if need be.
And within the larger context of Ballmer and Bartz in hot-and-cold discussions about a search and advertising partnership deal, his statement is clearly a signal to Yahoo to get on the Microsoft train or run the risk of getting run over.
Thus Bartz has got to ask herself one question as she ponders what to do: Do I feel lucky?