The (old) obsession with reach

Thanks to 'reaching up for air'I’ve waited a day to absorb the big news yesterday about ’s $44 billion, unsolicited offer to purchase .

There are a variety of opinions about the deal drifting around cyberspace, most of them not so good. That’s to be expected, I suppose, given the nature of my tribe and the people I read. The only really positive comments are coming from Wall Street, and that always gives me pause. I certainly think it’s interesting, but I’m always struck by the words “reach” or “scale” when used in analytical stories about mergers. In this case, the story goes, Microsoft can leverage Yahoo’s reach to better scale its online advertising growth.

You hear that a lot these days, as if increasing reach or better scaling were the solutions to all revenue problems associated with advertising. In the world of public companies, it’s ALWAYS about growth, so this is a logical strategy.

The problem with it, though, is that those words were birthed in the history of mass marketing. To be the advertising king, one must be able to “reach” the greatest audience. Yahoo is a walled garden that is stumbling right now, in part, because it has reached a saturation point of sorts. The company cannot create enough content or make content deals with enough people to produce investor-satisfactory growth, and this is problematic when its business model calls for exactly that. The newspaper consortium is there to give them more — and local — impressions, and I keep waiting for somebody in the consortium to take a real hard look at what they get in return. The assumption is that Yahoo cumes more people in a market than the local media companies do, so access to those people through ads that the media company can sell makes them more attractive.

I buy that, but it loses rationality when the company itself needs to add deals in order to sustain growth built around ad impressions under its control. The local media companies want Yahoo’s reach. Yahoo wants their content. And now Microsoft is going to want to sell those same impressions? It’s a reach/scale nightmare, if you ask me. Everybody is looking to Yahoo’s unique visitors as hills laden with gold, but one day somebody is going have an ah-ha moment in understanding that Yahoo’s back simply isn’t (and can’t be) big enough to carry everybody.

Google, on the other hand, doesn’t have that problem, because the Web itself is its platform.

The deal had been the source of speculation for a couple of weeks, where it has been painted as the rebel alliance trying to defend itself against the evil empire, a.k.a. Google. I’m a little puzzled though, because I can’t decide which one really represents the empire. Microsoft would have us believe the bad guys are Google, that all-consuming life form that’s swallowing up institutions with ease. Duncan Riley at TechCrunch (the link includes the letter from Steve Balmer to the Yahoo board) even went so far as to reference Google as “the Google Borg.”

But wait. Isn’t Microsoft the company that owns your desktop and the desktops of nearly every office computer in the world? Aren’t these the guys with an operating system that has been the source of entire cottage industries that have sprung up in order to make it safe to use? Aren’t these the same folks who escaped an anti-trust monopoly probe by the Federal government?

But here’s the real nut for me. Wall Street and Madison avenue look at Google and salivate over its “reach” and incorrectly view matching that reach as the path to competing with them. It’s not, because Google’s mission isn’t about obtaining reach; it’s about organizing information. Its reach is a consequence of that. Again, the Web itself is Google’s platform, and their method of operation is to serve it. The company describes its business as being an advertising platform, and of course they like the reach they’ve acquired. But they didn’t do it by going after impressions, etc., and this is a night and day difference between them and the Microsoft/Yahoo combo.

One thing that infuriates both Wall Street and Madison Avenue (don’t you love the way we describe institutions by their location in New York City?) about Google is that the company never asked their permission to do anything. Not playing by conventional rules has been its modus operandi from day one, and in that sense alone, it could hardly be described as the evil empire.

Google will do just fine. In fact, I’m not sure that either Microsoft or Yahoo has it in their nature to really be competitive with Google, because they’re stuck in the old business school model.

And I continue to press the belief that local media companies would be better off following the Google model in becoming the ad platform for their markets rather than swapping spit with Yahoo in an attempt to expand their holy reach.

And put yourself in the shoes of the people formerly known as the audience. Who wants all those hands reaching at them anyway?

Read: Jarvis, Umair, Duncan, TechMeme.

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  1. […] Terry Heaton’s PoMo Blog » Blog Archive » The (old) obsession with reach “One thing that infuriates both Wall Street and Madison Avenue (don’t you love the way we describe institutions by their location in New York City?) about Google is that the company never asked their permission to do anything.” (tags: via:toddmundt Google Microsoft Yahoo! business-model business-plan marketing myths) […]

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