Are Tech Businesses Inherently Temporal

Like pretty much everyone in the Internet world I’ve been following along somewhat with the long drawn out Microsoft/Yahoo merger attempt. It would be laughable if there wasn’t so much money involved. Mostly I find it funny that Yahoo seems to be reacting emotionally - “Microsoft is evil. Anything would be better than Microsoft.” - rather than making rational business decisions. Yahoo’s latest move - exploring outsourcing their search marketing to Google - is Yahoo practically saying they’d rather die than merge with Microsoft.

Yahoo’s Powerful Brand

Yahoo has an amazingly powerful brand due to their history on the net. I first started using Yahoo when it was simply a directory of websites hosted on Yang’s Stanford student account. I actually remember the shock of Yahoo getting their own dot com domain name. From those early days until recently I’ve been an admirer of the company and a regular user of their tools. Recently however the bloom has faded and my Yahoo use is becoming increasingly rare. My search activity has moved almost entirely to Google - mostly via Firefox search. My home page has moved from My Yahoo to Google Reader. My bookmarks have moved out of Yahoo into Google again courtesy of the GMarks Firefox plugin. I still have a Yahoo e-mail address but I’m moving away from that as well into GMail.

Why Yahoo is Fading

So why am I moving away from Yahoo? I like the brand clearly. I actually have a rooting interest in the company - I’d like to see them succeed. And I even own a few shares of Yahoo stock (bought at it’s peak). The two biggest driving factors are Firefox and blogs. When I moved to Firefox it suddenly because so easy to do Google search via the browser that the primary reason for visiting the Yahoo home page disappeared - I also very rarely go to the Google home page but Google really doesn’t miss me there. When I started to move more into consuming blogs it quickly became apparent that Google Reader was far superior to My Yahoo for following blog feeds. These two major factors are essentially industry changes. It’s not that someone built a better competitor to Yahoo’s products (though in the case of search Google clearly did) but rather that my needs and behaviors changed and Google tools better served those new needs and behaviors.

The Industry is Always Changing

All this leads to the question I posed in the title - Are tech businesses inherently temporal? Google appears to be king now but remember that Yahoo was king and before it AltaVista. The most interesting thing in the Microsoft/Yahoo deal was the analysis that Microsoft’s business might be dying. People have been predicting the demise of desktop computing for a long time but in recent months it’s starting to become more likely. Increasingly the browser is the operating system. In such a world Microsoft’s operating system business goes away. If the office applications - word processing, spreadsheets, presentations - successfully migrate to web based versions then Microsoft will be left with very little business indeed.

Innovate or Die

In the rapidly changing world of tech companies clearly cannot rest on their existing products if they wish to survive. It’s long been a criticism of Microsoft that they’ve created very little that’s new. They allow others to innovate and buy up companies. It’s probably a good business strategy but I wonder if it can sustain a company through a complete paradigm shift such as the world moving from desktop to webtop computing. You have to wonder if Microsoft can thrive even if they do manage to buy Yahoo. Perhaps the tech industry is just one where companies will always just come and go - making way for the next generation.