Anatomy of a Fine Rumor: A Microsoft Yahoo / Facebook Two-Step Aimed at Google

The rumor mill over Microsoft’s search for an online strategy is working overtime. The latest: Microsoft (MSFT) is working to buy Yahoo’s (YHOO) search business and then Facebook.

These rumors, swirling about Techmeme from John Furrier with an assist from Kara Swisher, have been stoked by Microsoft’s revelation over the weekend that is talking to Yahoo about a deal that isn’t an outright acquisition. Couple that chatter with the fact Facebook is in a skirmish with Google over data portability and you have an anatomy of a fine rumor.

But let’s not get mired in silly things like search market share and data portability (oh no, my profile is in a walled garden!). This Microsoft hubbub is really about arranging the pawns in an Internet chess game between Redmond and Google. Robert Scoble seems to agree. The rumors may change (the software giant’s most recent statement could be a ruse to derail a Google outsourcing pact with Yahoo), but Microsoft will buy itself a Web strategy. It will be an online ad player. And it might just be a search player too.

Facebook is just starting to come around to two key facts:

• It won’t IPO this minute and it’s unclear whether it can hold its valuation long enough;
• And Microsoft will overpay to give Facebook its cash today.

If you’re Facebook chief Mark Zuckerberg, what would you do?

It’s not an easy answer. Sure, you could keep buying servers, getting scale and bumping heads with Google, which is trying to make your business a feature. The smarter alternative may be to sell to Microsoft. Facebook profiles meet Office Live. Facebook profiles meet Office. Facebook profiles meet Outlook. You see where this could be headed pretty quickly.

But first Microsoft needs some search action, so it’ll overpay for Yahoo’s search team. Then it spends big for Facebook. By time the week is out, Microsoft could have an online strategy.

Is all of this mere speculation? You bet. But it wouldn’t be all that surprising either.

Comments

[patrickb]

I would advise you to check out Microsoft Surface, its a technology on the horizon. Microsoft's end game is a complex dynamic of Yahoo's services, their os technologies (Surface, server, xp, vista etc), and their own core application suites... throw in an exchange server and add a dab of a search core and your able to integrate your entire digital life inside microsoft technology.

Hypothetical: Your at a friends house and their kitchen table is a MS surface display. You throw down your digital camera and out pops all your pictures... you drag and drop them into a newly created facebook photo gallery. You then pop on to MS messanger and tell your friends to go check it out, they go and get on. You continue talking and then you decide your bored as your checking emails and talking and decide to load up one of yahoo's checker games. The game results are instantly loaded onto each others facebook profile wall and everyone can see you beat timmy 5-1 in the last 6 games. Furthermore as your writing on your girlfriends facebook wall, her smartphone's (running WM of course) automatically picks up the facebook wall post and displays it as a new facebook event.

This is just a simple hypothetical, the possibilities are endless

[carlivar]

patrickb, that sounds great until you realize Microsoft makes it and it will be a buggy, bloated mess. They can't even make a TV box (check out reviews of their AT&T Uverse IPTV box -- it is atrocious). And do I even need to mention Vista?