Blodget: ‘Microsoft’s Colossal Strategic Mistake: Getting Into Advertising’

Henry Blodget has an interesting analysis on Silicon Alley Insider of the motivations behind Microsoft’s approach to buy Yahoo! He says that Microsoft have misunderstood the opportunity that cloud-computing offers and that a B2B company shouldn’t be trying to make money through ad-sales. He says:

Microsoft’s Misconception: “Cloud Computing” = Software Supported By Advertising

The problem is the way Microsoft has always framed the “cloud computing” transition: paid desktop software licenses giving way to free web-based software supported by advertising.

This framing is wrong. It has also led Microsoft to believe it has no choice but to compete with Google in search and to buy Yahoo, aQuantive, et al, to beef up its advertising platform.

A better way of thinking about the “cloud computing” transition, in our opinion, is: paid desktop licenses giving way to paid web-based licenses

In this framework, today’s stark differentiation between the “Corporate” and “Consumer” markets doesn’t change. “Advertising,” moreover, has nothing to do with it–except on the Consumer side, which is far less important a market to Microsoft than it is to Google and Yahoo.

Microsoft’s Colossal Strategic Mistake: “We Need to Be in Advertising” - Silicon Alley Insider