- The Washington Times - Tuesday, February 5, 2008

Could Web-based applications be the key to what may be the computer industry deal of the decade? It’s still an open question in this observer’s mind whether the proposed acquisition of Web search near-giant Yahoo by software titan Microsoft Corp. will either come to pass or have a major effect on the world as we know it. But if it does happen, the shifting of computer applications from the desktop to the Web may be a part of the big picture.

For Yahoo’s shareholders, eyes misty recalling a near $120-per-share price during the dot-com boom, the $31 Microsoft is offering for each Yahoo share is nice, but nowhere near the heights those shares once reached. For Google, which competes with both Microsoft and Yahoo, the deal is rightly seen as competition and a challenge, one which Google is poised to oppose.

For the rest of us, well, there’s not much there, yet. Microsoft’s “Live Search” is good, but not Google-killing; Yahoo’s search engine is very good, but Google has leapt into the No. 1 spot with grit, determination, “viral” marketing and, oh yes, a better product. Or at least a product that much of the world thinks is better.

This is, however, a case in which the whole might equal a lot more than the sum of the parts. There are millions of people using Yahoo’s e-mail services, with an untold number paying $20 per year for extra online storage. They’re already loyal to the Yahoo “brand.” Microsoft’s customer base is well known: Just about everyone with a computer, Macs included, uses one Microsoft product or another. The online base for Microsoft is substantial as well.

For many observing this deal, the question of online advertising is central. Can a Microsoft-Yahoo team take a leading position in selling ads? It’s possible, but one of the key lessons of the dot-com boom and bust is that winning combinations aren’t always apparent, or guaranteed. Bigness counts, but not always; after all, Yahoo was once exponentially bigger than Google.

However, much of the chatter about online advertising may overlook, again, the question of online applications. This is one area where Google has made some inroads by offering word processing, spreadsheets and presentations online. All of these are compatible with Microsoft’s equivalents, and Microsoft has its own online versions of key applications, something to be discussed here further in coming weeks.

But if Microsoft can combine the online applications with both Yahoo’s reach and online ad sales, and the game can suddenly change. The two firms together would have something special to give that vast audience: online applications that are as identical to their desktop counterparts as Microsoft wants them to be, available globally.

Think about it: With sufficient computing power and Internet connectivity, you could be connected to your work anywhere in the world, via a “thin” notebook or desktop computer. If the software application and your data both reside on the Internet, then you don’t need as much hardware power as you might otherwise. That could expand productivity on many levels, as well as make powerful applications available to those not otherwise able to afford them.

The deal will face strict scrutiny from Congress, the Justice Department and Yahoo shareholders. If it clears those hurdles, we may be on the verge of a brave new world in applications, one that will be fascinating to watch.

c Read Mark Kellner’s Tech blog at www3.washington

times.com/blogs.

It would be interesting to see both Yahoo’s e-mail and Microsoft’s Hotmail augmented with some of the strengths of, say, Microsoft Outlook, but in an ad-supported, Web-based form. The advertising would have to be somewhat discrete, since looking at a big Coca-Cola ad might not be all that interesting or helpful in an office setting. But there are ways to “monetize” such applications, and I wonder if this isn’t part of Microsoft’s grand design.

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