05.14.08

Whom will you please?

Posted in Society at 16:42 by RjZ

What’s the best way to run a business? Is running a business about pleasing customers or making money? I think every business person worth their 401K retirement plan would not be able to ignore making money. You can’t please customers for long if you’re broke. Many would say that pleasing customers is the only way to make money, and from a marketing perspective, I’d agree. You’ve got to fulfill some need or want so that people will trade their money in for your product or service. If you’ve successfully met that need or want, well, you’ve got a satisfied customer. Except the question becomes a little stickier when the business we’re talking about is a publicly traded company.

Publicly traded companies have two kinds of customers. Consumers, who trade that money to have their needs or wants satisfied, and investors, stock owners, who make money (a need or a want) only when the company’s stock grows. I think this is what’s happening with Yahoo vs. Microsoft. Yahoo chief, Jerry Yang has rejected bids from Microsoft, claiming his company is worth more than the tendered offer. We won’t know if that’s true until the Yahoo’s stock climbs above $31 per share. It’s around $27 at time of writing.

Meanwhile, investors are going nuts. They see an opportunity for each $27 share to gain four bucks over night and, let’s face it, Microsoft and Yahoo make a pretty reasonable pair. Microsoft (still) owns the desktop market, they rule the server and business world, but they’ve failed time again expanding their business into the internet. Yahoo, on the other hand is second only to Google in search and still has the biggest market share of banner ads. Their web 2.0 application such as Yahoo Mail are excellent (much better than Gmail if you ask me). Microsoft has some pretty impressive innovations on tap (who knows if they’ll ever come to fruition) one using flickr (a Yahoo property) photos in some amazing ways. Synergies are good in business. They can mean one plus one amounts to three. Worth noting here, though, flickr, mail, and yahoo search users aren’t really Yahoo’s customers; they don’t pay the bills. Advertisers are Yahoo’s customers.

So, yeah, I get it. Except I don’t (directly) own any Yahoo or Microsoft stock and from where I sit, I feel for Mr. Yang. How is Microsoft’s culture going to blend with Yahoo’s? What value will the consumer see as a result of this merger? Even the flickr innovation I mentioned above likely works nearly as well with two separate companies (flickr’s APIs are available.) Microsoft hasn’t done much for me lately. New versions of office seem little improved from the older ones (understatement) and companies are resisting Vista like it was the black plague.

I’m not sure the merger does much of anything for pleasing customers. Which brings us back to the opening question. Easy for me to say, no shares and all, but while we read about investor revolt as Mr. Yang and his board walk away from some easy money, it seems worth asking again: what’s the best way to run a business? Isn’t it customers who ultimately pay the bills, even in publicly traded companies.

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