Ballmer refines Microsoft’s Yahoo! pitch again

Steve Ballmer is persistent if nothing else. He has once again gone to the media to clarify his position (presumably for investors and analysts in all fields) on why Microsoft wants to join with Yahoo! and how that union will benefit everyone.

In an article covering Ballmer’s comments at a conference, CNN offers the following quote:

“It’s really about getting the pooled volume, because you actually can improve your product faster if you have more users,” he said. “The more users you have, the more data you have about what users are interested in. The more users you have, the more advertisers you get. That doesn’t just help with revenue. The more advertisers you have, the more relevant you can make the ads.”

Okay, so the story has morphed from “combining the strengths of our companies … [through] our complementary assets [to gain] increased talent and scale” to “it’s really about getting the pooled volume”.

So all those Microsoft engineers who last year were afraid they would be replaced by Yahoo! engineers can rest easily. Apparently it will be the Yahoo! engineers who bear the brunt of the axe-cutting if/when the “complementary assets” are combined.

Yahoo! and Microsoft approach search technology in two very different ways. One methodology will have to prevail over the other. In an ideal merger MicroHoo would cherry-pick the most compatible minds from both pools of engineers and use that team to launch a new generation of search technology.

The remaining engineers could be reassigned to secondary projects working in tandem with the core search process. Maybe that’s what Ballmer has in mind and if so a lot of good programmers and analysts should be reassured on that score in some fashion.

But history teaches us that when search engines merge people get left out of the mix. Searchers don’t hang around when their favorite search engine changes the way it works. Searchers don’t hang around when their favorite search brand is folded into another brand.

The only way to maintain that combined market share is to maintain the two brands. Ballmer now appears to be suggesting he would do just that, since all he really wants (supposedly) is access to the user data so that the engineering teams could improve their product offerings and advertisers would feel more confident using Microsoft AdCenter to promote their 13th Century Venetian Art (BTW, Mr. Ballmer — no one is buying such ads on Google, either).

Balmmer’s Advertising-envy has caused him to jump through several rhetorical hoops in order to justify an insane merger that would most likely destroy a huge segment of the search market and actually concentrate more search market share in Google’s hands.

Google’s advertising service is struggling right now. It’s profitable but it has some kinks and even Google has admitted its revenues are off. Now is the time for Microsoft to invest in true innovation (something Microsoft admittedly has rarely practiced) rather than merely follow in Google’s footsteps.

Microsoft has the search volume to challenge Google now.

Microsoft has the search audience to challenge Google now.

What Microsoft consistently fails to do, however, is leverage the data it is collecting to compel advertisers and marketers to reach out to Microsoft’s 100 million monthly search visitors. Word around the PPC industry for a couple of years now has it that Microsoft advertising actually offers a better ROI in many verticals. It’s not like the business community would say “No” to increasing sales and profitability by refusing to use Microsoft if someone actually made a good case for their investing more money there.

This latest commentary from Ballmer implies that we’re due for another year of intermedia negotiation between Microsoft and Yahoo! — which only serves to destabilize the situation. You’d think Microsoft’s board of directors would have gotten a clue by now and realized that Ballmer couldn’t buy Yahoo! if his life depended on it.

Microsoft doesn’t need to waste billions of dollars on combining incompatible technologies and corporate cultures. That money would be better spent on doing what Microsoft wants to make its money on: advertising.

At this point, all Microsoft needs is for people to wake up and realize there is a real search engine at Live.com and that it reaches 100 million people. That will never happen as long as Steve Ballmer continues to act like a third banana in a two-banana market.