This article was written by Jay Bhatti and appeared on businessinsider.com – click here to see full version.
On Friday, Microsoft announced apartnership with Kayak to provide travel results. Jay Bhatti is a former Microsoft employee who founded the people-search engine Spock. Here’s what he sees in the deal:
1. Microsoft purchased Farecast a few years ago for more than $100 million. It’s safe to assume that it was another waste of money for Microsoft. The Farecast team combined with Microsoft’s resources could not build a compelling enough product to compete with Kayak. Heck, two years ago, Kayak complained to Microsoft that Bing’s travel product looked identical to Kayak. Looks like $100 million gets you a team that at least knows how to copy and paste.
2. Microsoft is again switching strategies. Less than 2 years ago, Bing was all about internal innovation and buying companies (Farecast, Powerset, etc) that would help it accelerate product development. Now, with this deal, Microsoft is admitting that it’s better for them to outsource innovation to vertical search engines like Kayak, as opposed to trying to build them internally. Not surprising about this change in direction since Satya Nadella has now been promoted at Microsoft to run the Server and Tools Division. In my opinion, it’s a great win for the server division and a huge loss for the Bing group. Satya is one of those executives at Microsoft who “gets it.” He did a good job of trying to unify the search efforts of Microsoft around Bing and then trying to create compelling experiences around Bing. The unfortunate thing is that the culture of Microsoft is all about doing good in your current role so that you can move onto greener pastures in another group within the company. Satya did a good job at the technical side of Bing and was rewarded with the Server and Tools group. If I were Steve Ballmer, I would have kept Satya in that role for a lot longer.
3. Forget vertical. It’s more fun being horizontal. A few years ago, Microsoft thought that they could compete with Google by chipping away one vertical at a time. For example, they bought Farecast to do travel, they did the awful cash back promotion to chip away on shopping search, and then they made a lot of noise in the marketplace about how their maps and pictures were delivering better results then Google. Now it looks like Microsoft is going to focus again on general search.
4. I use Kayak all the time and respect the product the Kayak team has built. This deal just further demonstrates their product leadership. Kayak will get more revenue, more profit, and more customers via greater distribution through Bing. In the end, this deal will help Kayak make a better showing at their eventual IPO. Given that Microsoft did this deal with Kayak, the new leadership at Bing is probably looking at other vertical search providers to power parts of their search.
5. If I am on the Bing team, this is a demoralizing deal. Management is telling the Bing Travel team that they are not rock stars from Mars, that that they cannot innovate, and that it’s better to use someone else’s technology. The only Bi-Winning happening here is for Kayak and Google. A few friends of mine at Google are quite amused at Microsoft outsourcing this part of their search. Yahoo outsourced search to Bing. Bing then outsources travel search to Kayak. Talk about passing the buck.