Thanks to Microsoft, Google is unleashed

If you’re worried that Google is too big and controls too much of the Web, there’s no comfort in today’s news that Yahoo and Microsoft have teamed up in search. The already slim chance that the U.S. Justice Department will go after Google on antitrust grounds has dwindled to zero now that there is a “credible” rival in the market for search advertising.

I put “credible” in quotes because the 30 percent of the market held by MicroHoo isn’t going to change much in the real world. But since it looks good on paper, the trustbusters (such as they are) would have a hard time making a compelling case for any sort of meaningful action.

[ For more Microsoft-Yahoo news on InfoWorld, see “Microsoft, Yahoo deal was a long time in the making” and “Microsoft and Yahoo are said to have reached a deal” ]

Remember, Microsoft’s share of the operating system market was a good 90 percent when the DOJ launched its action back in the 1990s, and there was plenty of opposition in Washington to making a move. What’s more, even though the case against Microsoft was very strong, it took forever to resolve and ultimately didn’t make a huge difference. Since this would-be case is so much weaker, why would Attorney General Holder and his minions bother?

But there is a real effect on us all: With two giant companies (let’s call the alliance MicroHoo) now sharing data on consumers, what little online privacy we had is going to be challenged even more. That will also affect IT, since so many organizations use Google’s search appliances and software.

Google’s management has great political antennae, and the opportunity to operate with little chance of interference will not be lost on it. In short, Google will be unleashed by this deal.

Bye-bye privacy

The big cigars (to use Gary Snyder’s apt phrase) at MicroHoo know full well that the alliance will raise red-flag warnings about the increasing concentration of private data in corporate hands. Here’s how they addressed it in the announcement:

The agreement protects consumer privacy by limiting the data shared between the companies to the minimum necessary to operate and improve the combined search platform, and restricts the use of search data shared between the companies.

Baloney. And I don’t say that just because I’m a cynic. From a business point of view, the big breakthrough in search was the ability to tailor advertising to search requests. The more data that’s collected, the better the ad engines can target the searcher. MicroHoo isn’t going to give that up, and even with the best of intentions (which it doesn’t have anyway), lots of data is going to be scooped up by that huge digital net.

And now that Google is entering the operating system arena with the Chrome OS, any concerns we had over privacy are even more worrying than in the past. The Chrome operating system, to be rolled out on netbook computers next year, will give the company another avenue to collect and monetize personal information.

A management nightmare Given the generally unquestionably favorable news coverage about the deal, you might be confused about Wall Street’s negative reaction to the news: Investors knocked the stuffings out of Yahoo’s share price after the announcement for a bunch of reasons. Wall Street has three good reasons for its skepticism.

Number 1: There’s no upfront money for Yahoo in the deal, despite lots of speculation that it could drop maybe $450 million into Yahoo. Had Microsoft purchased the company as it tried to do last year, it would have meant a huge cash payment to shareholders, but Yahoo stupidly rejected the offer, which is why Carol Bartz is now CEO. Sure, Yahoo will gain some revenue and be able to cut operating expenses as Microsoft picks up the burden of maintaining and improving search technology, but it’s still a disappointing payday.

Number 2: This will be a management nightmare. In effect, Yahoo is going to be Microsoft’s ad-sales arm. But who’s in charge, Redmond or Mountain View? If something goes wrong — and something always does — how does it get straightened out?

To assuage whatever antitrust concerns remain, MicroHoo said, “The agreement does not cover each company’s Web properties and products, e-mail, instant messaging, display advertising, or any other aspect of the companies’ businesses. In those areas, the companies will continue to compete vigorously.” Even if you take that statement at face value, the work of keeping all of these related threads squeaky clean will be substantial.

Number 3: Then there’s Bing. Microsoft certainly gains from having the extensive Yahoo Web properties using Bing for search. In addition to increased visibility, Bing will improve as it’s used more. To be sure, Bing has its virtues, but it’s not that good, and it’s certainly not a game-changer. Google will continue to dominate consumer and custom enterprise search.

The bottom line: If you were hoping that somebody, somewhere, would put the breaks on the Google juggernaut, you’ll still be waiting after this deal closes.

I welcome your comments, tips, and suggestions. Reach me at bill.snyder@sbcglobal.net.