Friday, May 4, 2007

Empires Are in the Air: Reuters/Thomson, Microsoft/Yahoo

The wires are ablaze with takeover rumors, the leading buzz being about an offer from Thomson to acquire Reuters. Reports put NewsCorp in the race as well, but this sounds like a tepid
"Plan B" as a backup to Murdoch's intents with Dow Jones. The matches in a Thomson-Reuters merger are fairly obvious - Thomson gets Reuters' low-latency content delivery and automated trading platforms for the investment bankers that they've been unable to woo in quantity as well as online ad revenues from Reuters' media offerings, Reuters gets fingers into the securities industry "buy side" and retail operations - but I wonder whether EC regulators are going to feel comfortable with such a dominant combination. On a global basis that would leave Thomson and Bloomberg as the only really viable content alternatives for supporting large-scale securities trading operations.

Then again, perhaps that's all we need these days: the content that's driving securities transactions increasingly comes from sources outside of traditional vendor databases, leaving enterprise-oriented content vendors to perfect data plumbing and desktop tools. In a rapidly consolidating global securities marketplace two may be the magic number for the years ahead. With plenty of cash on hand for just such a takeover Thomson is in an excellent position to tuck away a revitalized but still-fragile Reuters team.

Two may also turn out to be the magic number in online content as Microsoft and Yahoo reopen talks to figure out a better fit. The Wall Street Journal reports that the shelved discussions have been brushed off in light of Google's now-leading Web presence. Yet again, this may be a merger or alliance of necessity. It would cede that Yahoo has largely missed the boat on enterprise content while Microsoft has stumbled with consumer content, even as Google has forged highly profitable paths into both arenas.

As in the securities marketplace for Thomson and Reuters the potential for a Microsoft-Yahoo alignment is as much about global competition as it is with any U.S.-oriented concerns. Asian and European markets are tipping Google's way in comparison to Yahoo and Microsoft, a trend that may be accelerated by Google's office automation tools that would allow developing nations just starting to come online to avoid the dominance of Microsoft Office tools as a prerequisite for playing in the digital economy. It's not clear that a Yahoo-Microsoft merger would help either party in developing markets but it may be powerful enough to act as a brake of sorts on further Google dealmaking and advertising alliances in developed markets.

In both of these potential deals, as well as in the potential acquisition of Dow Jones by NewsCorp, is the looming presence of gigantism in publishing that seems somehow unable to counteract the emerging trend of micropublishing. Huge collections of copyrighted content and patented technologies don't seem to be able to make a dent in the explosion of content developed by and for peers who are able to collaborate effectively with relatively little help from media giants. If there's anything to be said for any of these potential deals to deal with micropublishing it would be to acknowledge that Yahoo has been good at attracting user content while Microsoft has an improving stable of collaboration tools. On the enterprise side Reuters has decades of experience in enabling market conversations and promises to do moreso with emerging social media technologies.

But in both of these instances it may very well be the case that the distraction of merger politics would decelerate rather than accelerate these crucial efforts, leaving these companies further behind in the race to capture value from social media. The time may be right for these potential super-mergers and the resulting balance sheets are likely to look pretty healthy at the end of the day, but gigantism may prove to be a very temporary stop-gap measure in efforts to counteract changes in publishing that seem to favor small and medium publishing efforts that grow organically from open source tools and Web-based communications standards. Which bring us back, as always, to Google, which is glad to sell people valuable contexts for monetizing all of this content in whatever medium is of interest to marketers. I'll avoid the usual dinosaur-versus-mammal metaphor and just say that in a rapidly changing publishing ecology we're better off chasing the mammoth of contextual content value than focusing on building city-states of traditional publications that rely on a vanishing economy based on the value of copyrighted content.
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