Microsoft & Yahoo Stalled but not Over – News Corp Enters the Fray: What it Means for Software, Advertising, & Innovation

With Yahoo shares down nearly 50%, Microsoft decided to prove the rumors true and make an unsolicited offer for Yahoo. The incredible $45 billion offer for Yahoo was designed to blunt Google’s advertising momentum, and stall Google with its recent entry in to core Microsoft businesses such as word processing.

At last year’s Wall Street Journal All Things Digital conference, Steve Ballmer said, The world-wide advertising market is a $520 Billion industry, yet only a small fraction of it is online. Their acquisition of an ad server / ad network form last year was telling, but now Microsoft wants to expand its distribution channels. That’s not all. No World Borders believes Microsoft’s dominance of Windows–platform–based applications won’t be enough to sustain the growth of the company going forward. Software as a service (SaaS) is the new opportunity Microsoft sees, and Google has the lead.

News Corp would have a different angle – expanding the search channel with social networking in MySpace, and leveraging its well-respected newspaper brands such as The Wall Street Journal.

  • Global spending on Internet advertising rose to nearly $20 billion in 2007, according to PriceWaterhouseCoopers and eMarketer.
  • Open source free software (nothing is free – you pay at least for support) means that more and more companies will innovate and move toward the relatively open playing field of SaaS.   The distribution channels are harder to control.  Just as song artists who may have been unknowns have used MySpace for visibility and iTunes for distribution, a new Ubiquitous Web linked by Semantics (see our posts on the Semantic web and applications of semantics) will enable a renaissance of SaaS innovation.
  • SaaS promises to cut licensing cost and make use of software universal, rather than tying it to a particular PC or server. No World Borders believes that as Saas permeates web sites, this development will help improve collaboration, collective intelligence, empower sharing of information tools with global populations. Even traditional enterprise software will have to compete with SaaS, with new market entrants such as Coghead, providing asset management and other tools via SaaS. This will mean more competition for Oracle, SAP and other firms who will either innovate toward more SaaS or acquire companies such as Coghead in the future. Big companies like SAP have launched DNA, and Oracle is pushing OnDemand. For big companies, they have to move carefully so as not to blow up their multi-billion traditional software businesses.
  • Those economies and demographics that have not had access to expensive Windows based systems will increasingly have access to faster internet connectivity, thus giving them access to Saas. It will lower the barriers to new products and services being viable. Analytical tools, communication techniques, and the ability to publish blogs and web sites reach more people, it will further the proliferation of empowerful individuals and small groups publishing information to the web. A renaissance of creativity and innovation will emerge with the best ideas coming from the best minds, rather than the largest corporations.
  • Social networking usage has recently dropped. News Corp, fundamentally driven by an advertising model, would be challenged with the combination which assumes even more advertising revenue. The amount of time the average person spends on a social-networking site has dropped 14% over the last four months, according to Internet research company comScore. The reason: they’re turned off by too much advertising on social-networking sites.

Microsoft’s attempted acquisition of Yahoo, a key gateway to finding new ideas on the web, is a mixed development for innovation and advertising. As a gateway to innovation, Yahoo will be molded into something to protect Microsoft’s core business, rather than be a free-thinking destination for innovation. Fortunately, Google has enough market share that Microsoft and Yahoo plus MSN do not pose a complete monopoly for the marketplace. As a fierce competitor to Google, Microsoft and Yahoo’s competition will likely cause price erosion in paid search advertising and ad placement.

News Corp (parent of the Wall Street Journal) may actually have a more innovative plan between its well-known content assets in news, and the social network momentum of MySpace, but it will have to be careful in the rapidly maturing market about how advertising is presented to users.

Michael F. Arrigo

Michael is Managing Partner & CEO of No World Borders, a leading healthcare management and IT consulting firm. He serves as an expert witness in Federal and State Court and was recently ruled as an expert by a 9th Circuit Federal Judge. He serves as a patent expert witness on intellectual property disputes, both as a Technical Expert and a Damages expert. His vision for the firm is to continue acquisition of skills and technology that support the intersection of clinical data and administrative health data where the eligibility for medically necessary care is determined. He leads a team that provides litigation consulting as well as advisory regarding medical coding, medical billing, medical bill review and HIPAA Privacy and Security best practices for healthcare clients, Meaningful Use of Electronic Health Records. He advises legal teams as an expert witness in HIPAA Privacy and Security, medical coding and billing and usual and customary cost of care, the Affordable Care Act and benefits enrollment, white collar crime, False Claims Act, Anti-Kickback, Stark Law, physician compensation, Insurance bad faith, payor-provider disputes, ERISA plan-third-party administrator disputes, third-party liability, and the Medicare Secondary Payer Act (MSPA) MMSEA Section 111 reporting. He uses these skills in disputes regarding the valuation of pharmaceuticals and drug costs and in the review and audit of pain management and opioid prescribers under state Standards and the Controlled Substances Act. He consults to venture capital and private equity firms on mHealth, Cloud Computing in Healthcare, and Software as a Service. He advises ERISA self-insured employers on cost of care and regulations. Arrigo was recently retained by the U.S. Department of Justice (DOJ) regarding a significant false claims act investigation. He has provided opinions on over $1 billion in health care claims and due diligence on over $8 billion in healthcare mergers and acquisitions. Education: UC Irvine - Economics and Computer Science, University of Southern California - Business, studies at Stanford Medical School - Biomedical Informatics, studies at Harvard Medical School - Bioethics. Trained in over 10 medical specialties in medical billing and coding. Trained by U.S. Patent and Trademark Office (USPTO) and PTAB Judges on patent statutes, rules and case law (as a non-attorney to better advise clients on Technical and Damages aspects of patent construction and claims). Mr. Arrigo has been interviewed quoted in the Wall Street Journal, New York Times, and National Public Radio, Fortune, KNX 1070 Radio, Kaiser Health News, NBC Television News, The Capitol Forum and other media outlets. See and for more about the company.

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