Microsoft's bid for Yahoo: A seismic Internet search change
By Erina Lin, Tuesday 5 February 2008 at 22:12 :: General :: #1207 :: rss
Should Microsoft and Yahoo make a deal, it would obviously transform the online ecosystem. However, before news that Microsoft was after Yahoo went public, there were few signs that Microsoft Chairman Bill Gates was about to make an acquisition that would transform the company and pose a threat to Google, writes James Robinson, of The Observer.
To compete against Google's biggest competitor, Microsoft and Yahoo have talked about forming an alliance before, but Yahoo's flagging share price has now given Microsoft an opportunity to buy it outright. If the bid goes successfully, it would bring a competitive edge in cyberspace to the software market giant.
The deal's short-term goal would be to create a strong alternative to Google by merging Microsoft's search engine MSN with Yahoo in order to grab as much as possible in the rapidly growing US$40 billion Internet ad market, according to The Observer.
Google, with a 56.3 percent share in the United States and an estimated share of close to 75 percent worldwide, is the undoubted leader in the lucrative search market. Yahoo, with a 17.7 percent global share, leads Google in some countries, mainly in southeastern Asia. Last year, Google made US$11.6 billion from advertisers.
“It has been on Microsoft's agenda to do something about Google's dominance of the search market for a while,” Andrew Frank, an analyst at U.S. research group Gartner, told The Observer. “They've decided that growing organically isn't working. Plan B is to combine the second- and third-largest search engines to make a concerted run at what is currently a one-sided market. But there's much more at stake here than search. It's about realising the company's vision of where it wants to be.”
Last week in London, Gates talked about “Internet pervasiveness”, and stated that companies were likely to use the Internet to store more information online, eliminating the need to buy and maintain the expensive servers. Microsoft and its rivals want to charge them to host that data, according to The Observer.
“The implications for a company that licenses software are alarming. Buying Yahoo would give Microsoft access to the expertise needed to address these changes, and a culture of innovation that some claim it lacks,” James Robinson wrote in the article.
It is still unknown if the deal will happen. Some say Microsoft's offer undervalues Yahoo, and a Microsoft expansion would likely pose regulatory threats, The Observer reported.
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