Microsoft needs a Blue Ocean Strategy

What is Microsoft thinking? Some think the acquisition of aQuantive by Microsoft might be Phase 1 of a Blue Ocean Strategy* and their hostile bid for Yahoo the Phase 2 of a Blue Ocean Strategy. While these acquisitions may increase share of the online advertising market and make them more competitive, competitors already exist and will be hot on their heels. They are simply buying more space in the already bloody red ocean of competition
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The acquisition of aQuantive seems a good perfect fit for Microsoft if they want to be more competitive in their current market, because its technology targets ads based on Web surfer’s habits. That opens large swaths of new customers to Microsoft, but the markets will soon be flooded with competitors after the same business.

So, what is the benefit of getting Yahoo? The basic job of any web site is finding things online. Both Microsoft’s Windows LiveSearch and Yahoo handle many searches as well as Google or Ask. But once people are used to one search engine it’s very hard to get them to change.

Both companies have important sites. Microsoft has a portfolio of sites, but none of them has attracted the consistent use of Yahoo’s Flickr. Yahoo’s acquired sites (Del.icio.us and Flickr) have had only minor upgrades over the years. In the blog arena, Yahoo cancelled its 360 site last year. Both companies have managed to have their instant messaging networks work seamlessly for the past 18 months. If that model has worked why buy Yahoo?

So the question is: where are the new Blue Ocean Customers that the combined Microsoft-Yahoo will bring to the table? My answer to that question is…..there aren’t any and the lead they may enjoy will be hard fought and short lived. The Red Ocean just got more bloody.

* Blue Ocean Strategy is the name given to the creation of brand new market space that has no competition. For a summary of these concepts email Dr. Sarah Layton at info@corporatestrategy.com or visit her website http://www.corporatestrategy.com/ or blog /.