I read this article this weekend in Business Week called Will Yahoo! Feel the Love? and I found it very interesting. The article basically focused on two important aspects of any merger - people and product. Here are a couple of very relevant points from the article:
- "If I was Google, I'd be thrilled. I can steal a lot of top talent out of Yahoo" said Norm Fjeldheim
- "Virtually all of the deals from Hell are done by companies that are collapsing into each other's arms like defeated prize fighters" say Robert F Bruner author of Deals from Hell.
- "Google is the single biggest threat Microsoft has ever had" said david B. Yoffie
- The company (Microsoft) is hoping to bring together Yahoo's research and development staff who've done innovative work in online advertising auction theory and data mining
- "We're the better technology (referring to Microsoft's adCenter versus Panama)" said Tarek Najim Microsoft's adCenter general manager
Those 5 bullet points outlined the challenges Microsoft has and that's assuming that Yahoo agrees to the deal which is looking less likely at this point based on this other article found on Business Week. Yahoo has been losing key staffers and management now for almost a year, but there are some very talented people still left like my good friend Richard K. I wonder how they would feel if they were kept on by Microsoft. Sure there will be a lot of duplication in staff positions but based on my experience the acquiring company has the leg up on key positions; plus as mentioned in the article the cultures are really different.
Yahoo! well is still that company with the purple chairs, fun loving people and Microsoft is very business like. Microsoft's attorneys are slow and methodical as is their sales staff. Speaking of sales staff Microsoft's has always been multi-layered and I could never tell what the chain of command was; for me it was my account person (ex - Dave M whom I like a lot) and then their head of media Joanne Bradford. Seriously, I can't tell you how many different layers of upper management I've had over the years with Microsoft. Every few months the new Account VP would want to meet their clients (always a good practice) but I grew tired of the meets and greets because the people would get changed out. Personally, I can't see how the employees will merge together.
The article referenced Yahoo's data team and I've always been fond of them. The problem with them going forward is how many of the data folks stick around with MSN's more conservative privacy policies? Remember I grew up in a data and analytics group in the old Bell Laboratories at AT&T and at the end of the day the data was only as good as the people that managed it and the people who analyzed it. An old boss of mine in BOA named Rich L once said "information is what smart people do with the data" and keeping those smart Yahoo data geeks around will be a problem for Microsoft.
Finally Microsoft's Najim is 100% accurate when he says that adCenter is better than Panama. I've had my problems with Panama from day 1. Panama increased my costs and I saw my conversions drop. Microsoft I've always been a fan of when it comes to ROI and conversions but sadly there isn't enough volume on Microsoft. Other than MSNBC there really isn't much traffic and that of course goes for search.
I do think Microsoft has to make this move to compete with Google. However, they have huge challenges ahead if they are counting on key people remaining through the merger. When E*Trade acquired Harrisdirect one person told me that historically 90% of acquired employees don't last a year. I don't know the source and it could only be anecdotal but based on my experience I certainly believe that number. Sure you can pay people with retention bonuses but they only last as long as that contract.