Microsoft Is Buying Startups People Love. Yahoo? Not So Much.

4 min read
This story originally appeared on Fortune Magazine

If you want to get people excited about an old brand, bring in something that’s actually exciting.

Yahoo and Microsoft are very different companies. Yahoo makes its money on advertisements; Microsoft makes its money on software sales, much of it to big businesses. Yet both companies, having lost relevance, seek to regain it in part through splashy acquisitions.

In her two and a half years as Yahoo’s chief executive, Marissa Mayer has acquired more than 40 startups. The most notable? Tumblr, the beloved, money-losing social network for which she paid $1.1 billion. The rest were notable for their lack of notability: Blink (messaging), Cloud Party (virtual gaming), Rondee (conference calls), LookFlow (image recognition), Ptch (mobile video).

A large acquisition always risks becoming a distraction of equal size. For Yahoo, which counted 12,300 employees shortly after it closed the Tumblr deal, the problem has historically leaned in the opposite direction: the acquired companies were quickly swallowed by Yahoo’s dominant culture. Tumblr aside, most of Mayer’s acquisitions were of companies that make technologies useful to Yahoo, rather than services that users openly loved. The deals brought a lot of mobile talent to a company that had just 60 engineers working on it in 2012. But they didn’t promise to stir the imaginations of its customers.

Microsoft CEO Satya Nadella’s strategy is different. On Wednesday Microsoft announced the acquisition of Sunrise, a well-designed calendar application for mobile devices that’s popular among users (it’s consistently ranked highly in app stores) and critics (tech culture site The Verge named it the best calendar app in 2014) alike. The deal comes on the heels of Microsoft’s acquisition of Accompli, an e-mail app with an equally as rabid user base as Sunrise. Accompli became Microsoft’s Outlook app, which garnered positive reviews: Business Insider called it the best e-mail app; Mashable loves it; Walt Mossberg loves it; and The Verge went so far as to declare that the best way to use Google’s Gmail on Apple’s iPhone is with Microsoft’s Outlook app. Talk about an odd soup.

Owning small apps that people love may not make a major impact on Microsoft’s bottom line, which still depends heavily on sales of Windows and Office. The tactic may not help Microsoft’s own mobile ecosystem gain footing, either. (Sunrise isn’t available on Windows phones today.) But it certainly helps modernize the company’s aging image, particularly as business software looks and acts more like consumer apps. For once, people are viscerally excited about Microsoft products. Surprised, but excited. That’s more than Yahoo can say.

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