Microsoft / Yahoo - it's about the users

The Micro-hoo deal has been talked to death, but it does raise an interesting point on the direction that these big tech companies are heading at the moment, which is perhaps indicative of the overall trend.

Every big tech company seems to be converging into a space that's going to be about software + hardware + internet + search + advertising. And advertising seems to be the most important area for all these companies - Microsoft, Yahoo, Google (yes, throw in Apple and Nokia too) to get their act together.

Gone are the days when Microsoft was all about DOS or Windows. Today, think XBOX and the Windows Live services. Similarly Google isn't just search anymore, but nifty tricksy apps like Google Maps and Google Apps. We've not yet seen hardware from Google, but it's ANDROID project seems like a nod in that direction. Don't forget that Nokia has bought NavTEQ, launched OVI and is readying N-Gage whilst Apple's iTunes is still going places and .mac still survives.

Detractors have said that Microsoft already have its share of web products and buying Yahoo would create conflict and confusion. Yet, the Microsoft-Yahoo deal sounds like perfect sense to me. Because whilst techology, products and company assets are the big and obvious factors (see other deals), this deal highlights an asset that's often overlooked and which is painfully important - users.

Yes, it's obvious that Microsoft have loads of competing products in the same space as Yahoo - think Yahoo! Messenger vs. the Windows Live Messenger, Hotmail vs. Yahoo!Mail, Yahoo! 360 vs. Windows Live Spaces (does anyone use this anymore?) and the loads of other social networking tools and net apps available.

But the real dealmaker behind this deal is not the apps or services or technology (though there might be some of that in there somewhere), it's the user-base that Yahoo! has amassed that's making this deal so attractive.

A cursory web-trawl didn't help me find any numbers for this but anectdotally, virtually everyone I speak to has used a Yahoo! service at one point or another and most are still actively using them.

But won't users jump ship post acquisition?

Granted, users can even jump ship pre-acquisition. Or just about whenever. But the fact that Yahoo! has maintained a relatively steady visibility and user-base (even after Google's Meteoric rise, and let's face it, Yahoo apps aren't half-bad), indicates to me that users will more likely stay (especially if I've got all my lovely photos uploaded on my Flickr pro account).

Also the trend towards open social networks, means users are more and more looking or interoperability from the networks, services and apps they use and probably won't mind the merging of competing Microsoft - Yahoo services into one app (like finally collapsing Hotmail into Yahoo! Mail.)
Why users, though?
Because users translate into revenue in terms of an advertising sense, and that's really what its about isn't it, really?

I think the Microsoft-Yahoo! deal will shed more light on what the future will become (on the convergence track) and how deals are made. If technology was the Number 1 asset previously, it's time for companies to take stock and look at how they can acquire users instead of just technology.