Being a YaHOO shareholder, you might think I’d be in favor of Microsoft buying them, but I’m not. Jeremy Schoemaker produces a crystal ball and attempts to make a case for 10 reasons why Microsoft will acquire Yahoo next year. It isn’t completely without merit, but here’s a point by point rebuttal. Jeremy’s points are bolded.

1. The search algorithm… duh…. Um, a big no duh. Maybe Yahoo’s search algorithms produce more traffic for Jeremy’s website(s) than MSN, but in our case Yahoo is a distant #3. I’d probably put Ask.com (disclaimer: I own shares of that too). For example, just <>try to find this website with a specific query like “makeyougohmm” or “things that make you go hmm blog” (26 results of mostly other sites talking about this blog, but no link to this blog — it shows “about 33 results” but only 26 are listed).

Yahoo management also has admitted — and then later retracted — that they were satisfied not being #1 in search. Add to that trying to incentify people to use their search and Yahoo search tastes like a rainbow soda. Ever had one of those? It’s where you mix a little bit of each soda into a single drink.

Yahoo search isn’t worthless, they do have some good niche search engines, but their main search engine isn’t any better than what Microsoft already is working on.

2. Overture Yahoo Search Marketing. compared to Adcenter. I agree with Jeremy that AdCenter has been too slow in development, but I think we’re seeing them take a more cautious approach to make certain their product competes. I also agree that they don’t have the inventory — yet, but two of the top 10 websites traffic-wise are MSN and Live.com which means if/when they decide to start throwing that weight around watch out. I’ll take AdCenter potential over what Yahoo Search Marketing is currently doing.

The silver bullet? Yahoo doesn’t have a micropayment program to tap directly into (Microsoft Points used through Xbox Live). Just wait until Microsoft unlocks this program so webmasters can slice a layer of selling goods in the Live Marketplace and Zune.

3. Yahoo Publisher Network - YPN IMO is the best contextual advertising network there is. Come on, Jeremy, Adsense blows YPN out of the water. Russell Beattie bragged that YPN was so awesome that a few months later he quit blogging altogether. Is YPN better than what Microsoft has? At the moment yes, because Microsoft hasn’t released AdCenter so smaller publishers can compare. 4 of the 8 things I suggested Microsoft could do in 2006 to better compete against Google in 2006 revolved around AdCenter. They didn’t pull the trigger on AdCenter for the masses which has arguably Microsoft’s biggest disappointment. Again, as I said in #2, I’ll still take Adcenter potential over what YPN is already doing.

YPN does have the best customer service. You can get a real human being to answer questions about the program. I like it. AdCenter needs that. If Microsoft could hire the people responsible for the customer service side of YPN, they should do that, but YPN itself? Nope. YPN just released ad filtering capability that Google has had for over a year.

4. Flikr - Again Microsoft may have a similar product but the volume is here. Spelling gremlin aside, Jeremy is looking too much at the geek core and not enough at regular people and the business side of things. Flickr is a great service but there are mixed reports about how much this service contributes to the bottom line as well as confusion with a popular Yahoo service Photos. Yahoo stock isn’t very healthy and while I’m one of the people who thought the Flickr acquisition was smart, time has not proven it to translate to the bottom line very well. I hope things change in 2007 and Flickr becomes the dominant photo property at Yahoo and contributes more to Yahoo’s profitability.

5. del.icio.us. Another geek favorite, but small potatoes for Microsoft. Not likely to have much, if any, impact for Microsoft in the marketplace, particularly when dozens of competitors exist out there. Microsoft would be better off buying StumbleUpon.

6. The People - Microsoft has tons of stale old people who do not understand this new industry. Jeremy must not know enough people who work at Microsoft. There are some great people who work there. Not saying Yahoo doesn’t have some stellar employees like PHP creator Rasmus Lerdorf, but think about the people who have left Yahoo to work at Microsoft like Gary Flake? Calling people like this “stale old people” is a heavily flawed observation.

7. Video - Between Yahoo Video and Microsoft’s Soapbox They might be able to combine for a decent share of the video market. Might is the keyword here. Would be less expensive buying Metacafe or one of the dozens of other video services out there. It’s interesting that Jeremy doesn’t mention Yahoo bought Bix recently to further strengthen the contest side of their video service.

8. Community properties - Yahoo has yahoo groups whose numbers rival Myspace.. This is one of Yahoo’s strongest assets but it was weakened by a lousy design that took them too long to update. Worse yet, the search was the #1 weakness spotted by others when Jeremy Zawodny asked for feedback. How lame is that being a search company with a heavily used product that has inferior search?

9. Business Directory - Microsoft Just gave up there Business Directory efforts. Yahoo has always rocked it with their paid inclusion directory. Rocked? Really? Are we thinking about the same directory? (I’m not sure, that’s not sarcasm) The paid “maybe” search inclusion has been a black eye for Yahoo among webmasters, particularly adult webmasters who need to pony up $600 to not even be guaranteed a listing.

10. Yahoo Just cleaned house. That should be a loud and clear signal that they are in trouble, not that they are healthy.

The bigger question in this discussion for Microsoft should be whether or not they should swoop in as a defensive move against Google. That would be one main reason I think Microsoft has to be at the table as a player. It’s interesting Jeremy doesn’t point to that as a key reason Microsoft should acquire Yahoo. There are some other possible players here like eBay and Apple who should also be part of the discussion. Will anybody pull the trigger on Yahoo in 2007?

Doubtful.

Sorry Y! employees, but Yahoo reminds me a bit like being Sony at the moment. While they don’t have the bad PR problems that Sony has (widespread PS3 shortages, battles with homebrew, rootkit, etc), Yahoo’s worst enemy and biggest competitor seems to be themselves. How they can end up with multiple products competing with each other rather than blending into a single, strong vision is vexing.

I’m hoping 2007 is a better year for them but if I was grading their performance in 2006 with a couple notable exceptions like Yahoo Answers and their developer areas, it would be a D+.

What have you liked about Yahoo in 2006? Do you agree with Jeremy’s list? Would you provide additional or different reasons Microsoft should seriously consider acquiring Yahoo? Thatedeguy weighed in yesterday and he doesn’t think it will happen. You?

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