13
Oct
07

battelle ask the right question that microsoft shareholder needs to know

battelle asks the pertinent question: how will microsoft get 25% of its revenue from ads in a few years’ time:

Let’s put that one in perspective. Microsoft is currently a $51 billion business. Twenty five percent of that is nearly $13 billion. Given that he’s talking about a few years out, with current annual revenue growth rates, one can safely assume that’d be 25% of around $65 billion, or more like $16 billion. That’s two and a half times Yahoo’s current size, and north of where Google will probably end up this year.

it’s clear that to me that ballmer was sold a bill of goods on the advertising business from kevin johnson and others that make no sense. just imagine what kind of answers ballmer/kj has been getting from mcandrews on the incredible bright prospects of advertising for microsoft, after he got ballmer to pay for a very much over-priced acquisition in the advertising space, namely, his company aquantive. (and it’s not just me calling it overpriced, it’s overpriced based on the market’s evaluation of aquantive stock and future prospect) mcandrews simply isn’t going to say anything other than microsoft will more than make back the rich price paid for aquantive, and that it will transform microsoft into an advertising powerhouse, and thus will squeeze google’s cash cow and prevent it from funding attacks on microsoft’s software business.

i think this advertising initiative will be the equivalent of steve case’s time-warner merger with aol. not as bad a fiasco because microsoft still has a robust software business, but it’ll be the downfall for ballmer.

the question that battelle should ask is: is this 25% a replacement of other microsoft revenue in the software business, or is it new reveneue that’s not currently accounted for? if they are switching 25% of their current software licensing revenue to advertising based, that’ll be nice to know as it is a purely defensive move.

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