Response to News – Yahoo Microsoft

By April 21, 2008General, Industry News

An Ugly Photo

The talk doing the rounds this weeks all seems to be about the massive power struggle on the other side of the Atlantic – and not the one involving Hillary Clinton and Barack Obama. No, all eyes are firmly turned to the attempted buyout of Yahoo by Microsoft.

The sums involved are staggering (Microsoft are offering $44.6 billion) – but what is more important is that the outcome is likely to have a highly significant effect on internet business in the short term and, in the long term, may even dictate where the future of the web lies.

It has been no secret that Yahoo has been in deep trouble for some time, once the global leader when it came to internet based business it is now losing users and money at a shocking rate. Furthermore advertising, hitherto Yahoo’s likely saviour, is not bringing in anywhere near predicted levels of capital. In short, the outlook is bleak and the share price is low.

Enter Microsoft – one of the world’s most powerful companies and potential buyers with almost limitless resources. To all intents and purposes these two businesses couldn’t be further apart at the present moment. However, they do share one common problem – Google.

For Yahoo the decision to invest in content whilst Google decided simply to make its focus search results is undoubtedly the reason behind their current relative positions. And, for Microsoft, Google’s entry into niches traditionally seen as Microsoft’s territory (web based email for instance) whilst accruing massive advertising revenue has started to become something of a problem.

Google also looks set to go head to head with Microsoft for domination of the growing market that is mobile internet space.

So it is that Microsoft is launching this audacious bid for Yahoo – the theory being that the supercompany created by the buy-out would be in a position to meet Google’s challenge head on.

However, there are problems even here – though largely ones of face…and no one likes to lose face. Should Microsoft be successful in their buyout it will certainly give credence to the growing belief that they are rattled by Google’s growth and power – after all, why else would they need to consolidate like this and at this time unless things weren’t as rosy as they seemed. Similarly, if Yahoo’s board decide to accept the offer it will be a clear admission that they simply can’t halt the company’s current slide.

Of course, even if all this is surmounted there is still no guarantee whatsoever that the new company will be powerful enough to rival Google in the battle for the internet.

This doesn’t appear to deter Microsoft CEO Steve Ballmer though, who has now given Yahoo just three weeks to respond to the current offer – Yahoo, for their part, have been holding out claiming that the offer on the table doesn’t value the company high enough (even though it is 62% above Yahoo’s market value).

These latest movements seem to suggest that an endgame is close – and with it a possible reshaping of the internet’s power players. This, of course, is hugely exciting – will we see new search algorithms allowing ever more accurate results to rival Google coming out of Microsoft/Yahoo’s fabled labs, will Google’s ever-increasing power result in a total stranglehold on internet services?

Even more than that – what ripples will spread out into the marketing world? Rest assured, there will be plenty.

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