Three Steps Microsoft and Yahoo Can Take to Beat Google

With the acquisition of Yahoo by Microsoft looking ever more likely, it’s time for the future combined entity (yes, that’s right - MicroHoo) to face reality. If the purpose of the merger is to beat Google at search, then it will fail. Google has won the search wars - get over it. Google is now the web’s default home page and every potential competitor needs to accept this and figure out how to co-exist.

Does this mean MicroHoo is doomed to failure? No - not if they focus their resources in the right areas. If MicroHoo lets Google own search, it opens up the rest of the web to compete in and dominate. Here are the three most important steps MicroHoo needs to take:

• Stop producing content. As CNET has learned, producing content is expensive and the margins are horrible. Google does not have writers, editors and producers on staff. Google seeks to organize the web’s content, not produce it. Both Microsoft and Yahoo have lots of people generating content and as long as resources are going into this area, MicroHoo’s margins will never get close to Google’s. Instead of producing the content internally, focus on becoming the platform on which users generate their own content. Both Microsoft and Yahoo have jumped on the user generated content bandwagon to a certain extent already, but to compete with Google they need to focus on this.

• Buy a social network. The notion that social networking is just a passing fad, or that social networking users will show no loyalty and jump from network to network, just isn’t true. The biggest social networks have large, growing user bases that MicroHoo needs to tap into. Social networking users spend huge amount of time everyday on their network of choice and MicroHoo must be part of it. So who to buy? Facebook is off the table and now Bebo is gone. But that leaves at least Hi5 and Piczo. While these are second tier networks in terms of users, the marketing might of Microsoft and Yahoo could easily propel either of them to the top three, right up there with Facebook and MySpace.

• Become the center of the blogging universe. At their core, blogs are mini-social networks. They attract engaged readers on a regular basis around thousands of topics. Yahoo recognized this with their purchase of MyBlogLog, but it needs to go further. Instead of playing around the edges, MicroHoo needs to own this space. Step 1: buy a blogging platform like Automattic (the company behind WordPress) or MovableType. Imagine all the services MicroHoo could offer to the hundreds of thousands of bloggers on either platform: ad revenues via the Yahoo Publisher’s Network, automatic MyBlogLog integration, integration with the social network they need to buy, preferential search services on Yahoo. Bundle all these services into the blogging platform itself and watch the usage (and revenue!) take off. Step 2: buy Technorati. Blog content is just not easy to find, especially for newbies. Buying Technorati starts MicroHoo along the path of becoming the central place where people go to find relevant and interesting blog content.

Microsoft and Yahoo have awe-inspiring resources. As long as they don’t try to take Google head-on in search, the new MicroHoo can continue to be a major player on the Internet and give Google a run for its money.