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Yahoo comes up short among a group that matters

May 11, 2008|DAVID LAZARUS | CONSUMER CONFIDENTIAL

There's been no shortage of opinion about what went wrong with Microsoft's "failed" $47.5-billion takeover of Yahoo (I'm hedging because a lot of people still think the deal could go through, once cooler heads prevail).

But amid all the analysis and punditry since talks between the two companies fell apart last week, the one angle that's proved elusive is what avid users of Microsoft's and Yahoo's products have to say.

I'm not just talking about people with computers and Internet connections. I'm talking about people for whom information technology is part of their DNA, who can't imagine making it through the day without access to Facebook and YouTube and the other feeding grounds of the chronically wired.

That's why I found myself the other day surrounded by a couple of dozen fresh-faced students in the tech center of Loyola High School, an all-boys college-prep academy near downtown Los Angeles. Founded in 1865, it boasts of being the oldest school in Southern California.

One look around told me I'd come to the right place. Nearly every kid was clutching a school-issued white Apple laptop and busily multi-tasking throughout our conversation. Some didn't even bother glancing up from their screens while answering my questions.

Two things quickly became clear:

Yahoo isn't very cool.

Microsoft, surprisingly, is.

The reason for Yahoo's anti-coolness, of course, is Google. I asked how many of the students use Google every day. All hands shot up. How many use Yahoo every day? Two hands.

"I don't even think about Yahoo," said 15-year-old Tyler. "I always go straight to Google." (For privacy reasons, and to keep angry parents off my back, I agreed to use only the kids' first names.)

And Microsoft? The company once dubbed the "evil empire" by techies has whole new street cred among young people, and the reason for that isn't Windows and it isn't Office. It's the Xbox.

Among kids who play video games, and that's most kids, Xbox rocks. That's due in no small part to the massively popular sci-fi shoot-'em-up Halo and its two sequels.

More than 20 million copies of the games have been sold to date.

"Microsoft has been the leader in technology for many years," said Michael, 16. "It could have really helped Yahoo."

I asked if everyone knew who Bill Gates was. All hands shot up.

I asked if anyone could name Microsoft's current CEO. No hands.

Steve Ballmer obviously needs to do a little brand building of his own.

Speaking of which, I couldn't help but notice how often Rupert Murdoch's name came up during our conversation.

On the one hand, the News Corp. chairman and chief executive got props for owning social-networking site MySpace, even though everyone agreed Facebook is way cooler.

But Murdoch was also viewed by some as a manipulative, world-dominating figure, the Dr. Evil of corporate America.

"If somebody like Rupert Murdoch bought Yahoo, we would get whatever news he wanted to show, not what we're searching for," said Garrity, 16. "When I do a search, I don't want to see someone else's priorities."

The consensus among the kids was that Yahoo's a goner if it sticks to its guns about going solo.

Google is crushing Yahoo when it comes to search and free e-mail, they said, and there just aren't enough good reasons to visit Yahoo or stay within its online ecosystem -- an important selling point for advertisers.

"Microsoft would make Yahoo better," said Jason, 16. "Microsoft has ideas about how Yahoo can compete with Google."

Whether or not that's true, the perception among the students, as well as many in the investment world, is that Yahoo had its chance to dominate the Web and was eclipsed by a more nimble player.

Personally, I think Microsoft's and Yahoo's corporate cultures would make for strange bedfellows, and that a merger would cause more problems than pluses. Think Time Warner and AOL rather than Disney and Pixar.

That said, Microsoft might be Yahoo's best hope for long-term survival amid a rapidly consolidating media landscape.

"I don't want to see a Bear Stearns thing happen to Yahoo," said Andrew, 15. "It would be a smart move on Yahoo's part to avoid that."

Andrew, who clearly finds his way to the business section from time to time, was referring to investment bank Bear Stearns' fire-sale acquisition by JPMorgan Chase. JPMorgan originally offered a measly $2 a share for the ailing Bear Stearns, but then upped the price to $10 a share as a sop to outraged investors.

Yahoo, unlike Bear Stearns, isn't knocking on death's door. But the company's prospects aren't shiny and bright. No wonder Yahoo's stock plunged 15% Monday after the talks with Microsoft collapsed over last weekend.

The students had no qualms about big companies getting bigger, or favorite sites being gobbled up by synergy-seeking corporations. YouTube, they pointed out, is no worse for having been purchased by Google for $1.65 billion, and in many ways is better because videos come up more easily in searches.

I mentioned a rumor going around that if Microsoft can't have Yahoo, it might make a play for Facebook. The kids had no problem with that -- as long as Microsoft didn't clutter things up with ads. They were adamant on this point. Some ads, OK. Lots of ads, nix.

"Corporations are a good thing," said Jeremy, 15. "But too much of a good thing can be bad."

Generally speaking, big companies don't seem to be viewed with the same suspicion by young people as they once were.

If anything, a heavyweight corporate brand connotes a welcome sense of strength and stability.

"Hippies say corporations are bad, but they never say why they're bad," said Cameron, 15. "Corporations make a profit. What's bad about making a profit?"

If only it were that simple. But I'll let the Loyola lads learn that particular lesson on their own.

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Consumer Confidential runs Wednesdays and Sundays. Send your tips or feedback to david.lazarus@latimes.com.

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