So who’s Microsoft going to buy now that it can’t buy Yahoo? No one, says the FT, citing an interview it just conducted with Steve Ballmer. No Facebook deal, no AOL deal, no sweeping roll-up of all of Silicon Valley’s hottest start-ups.
The reason to buy Yahoo, Ballmer says, was for Yahoo’s search assets. So just buying other Web properties isn’t a replacement strategy. That sounds right to us. On the other hand, we’ve read the FT’s transcript of the interview, and we don’t see the part where Ballmer rules out other deals across the board. Here’s the pertinent part:
FT: A lot of people are now saying Yahoo was Web 1.0 and would have been difficult to do, and you should instead be looking at the next thing – Facebook or social networking, whatever comes after that.
MR BALLMER: I think people don’t understand what they’re talking about. At the end of the day, this is about the ad platform. This is not about just any one of the applications. The most important application for the foreseeable future is search. It’s where you start things. It’s where you express intent. It is important.
I don’t think we can say, OK, well, we’re going to be in the ad platform business, and we’re going to do it just on the strength of non-search based assets. We have to be in the ad business, and we’ve got to have a good chunk. We don’t have to dominate, but we’d better have a darn good chunk of the search market over time, and we’re working away at it.
We don’t want to spend too much time parsing this, because Ballmer’s being quite clear here about why he wanted to buy Yahoo, and why acquisitions alone don’t constitute a plan B. So that’s an argument against buying a collection of assets like, say, Digg and a dozen other hot apps/services. But we don’t see him shutting the door to other deals, period.
AOL, for instance, isn’t “any one of the applications” — it’s a way for Microsoft to immediately scale up its ad platform. We’ve previously argued that an AOL deal makes sense for Microsoft: Platform A boosts display business, mail and IM would be complimentary, etc. And although we think it makes more sense for Yahoo, we don’t see Ballmer ruling this out here.
Addendum: Strategy questions aside, we love Ballmer’s intensity. Just read this defence of Microsft’s online strategy and tell us you don’t get chills:
In a sense online is our best deal, isn’t it? We’re small; the other guys are big. There’s a market out there. We have only one way to go, and it’s up, baby, up, up, up, up, up!