361 Patent was the brainchild of Bill Gross, founder of IdeaLab who had this great idea of monetizing search results by showing the users advertising based on the keywords they type, he though of it as an Yellow Pages on the Internet where users could search what they want and they were ads too. This idea was shamelessly stolen by Google who before this made zero revenue. Bill Gross who later found Overture Services (formerly GoTo Inc), which was bought by Yahoo and in turn Yahoo had the right’s to this crown jewel “361 Patent”.

Once Yahoo got the rights to ‘361 Patent’, it started enforcing other companies who were licensing it from Overture Services to follow its rules. One of the biggest licensers from Overture was Microsoft who were paying hefty fees for it. Now Yahoo started making life hell for MSFT when it came to Paid-Search advertising. This made Microsoft less innovative in search because no matter how good their search was, they always had to toe the Yahoo’s line when it came to monetizing the search and paying most of the money to Yahoo for using the “361 Patent”. It just didn’t seem practical for Microsoft to innovate when they can’t make money of their search or pay most of the money to Yahoo.

Whereas Google got the patent licensed in a very shady deal where nobody clearly knows how much they paid and it gave them an edge in Paid-Search advertising. The reason they got a good deal from Yahoo might be because of their Stanford roots or because of common VC’s. It was a clear conspiracy by Yahoo to make the battlefield uneven and making Microsoft insignificant in Paid-Search model. It is a payback time for Microsoft and boy are they doing it at the right time. Microsoft is known to come late to war and be the last one standing, will they do it again.

You can read more about 361 Patent and its repercussions in Usman Latif’s website here. He has written a detailed and well written article on this.

Monopolies are bad for users, mainly because there is very less room for innovation and corporations who are monopolistic tend to exploit users. Google is a publicly traded company and it has shareholders to satisfy every quarter, No matter what their motto is be it “Don’t be evil” which Sergey Brin coined or the parody of it “Do less evil” which Bill Gates coined in reference to Google self-censoring its search to enter Chinese Market. Google has to show profits every quarter to keep up its market value. With the way things are going in Search Market, there is no room for any start up to compete with Google because they are too big and if Google sees a threat from the start up, they buy it and let it rot in their stables. Here is the list of the companies Google bought.

Haven’t we all seen how monopolies destroy the market and stagnate innovation. It is currently happening in Operating System Market, when was the last time we saw something amazing on our desktops and laptops with the exception of Mac OS X. Wouldn’t it be great if Microsoft had some real competition in Operating System’s where it would have pushed them to innovate rather than churn out under tested and over funded Operating Systems.

The other reason i want Microsoft to buy Yahoo is because when Google has competition, it might have better privacy policies in place than what it has now. Privacy International goes on record saying Google has been placed at the bottom of its rating for its privacy policies. Even Microsoft has better rating than Google when it comes to privacy. You can read more about it here. Is it not scary when a monopoly like Google holds the users personal data for whatever reasons. Maybe they are not exploiting the users now, but what if in the future they do when they don’t have any competition and we users don’t have any other alternative to go to.

So when Microsoft buys Yahoo, fields would get more even for a fight in the search and online advertising market which only helps the users. Believe me, there would be more innovation in the Search now then we have seen in past 3 or 4 years. Competition is Good for the market, and the only company in the World which has a chance of even competing with Google is Microsoft.