Microsoft goes for Yahoo!

MicrosoftIt’s now a week since Microsoft announced its $45bn bid to buy Yahoo!. There has been a lot of good coverage, and the links below give a good insight into the deal. I can’t see it being turned down by the Yahoo! shareholders as the offer is way above the current share price. The authorities shouldn’t really question it.

The main point for me is whether it will make any real difference in the long run, or even the medium term. Even with a combined share of the search market, Microsoft and Yahoo! don’t come close to matching the dominance of Google (in 2007 MS + Yahoo! totalled just over 3bn searches to Google’s 5.6bn.) Add in the time it will take for the deal to actually go through and then the time for the integration of the two companies to start in any real way (not to mention different company cultures) and then any merging of search technologies. Even the back ends of the companies are different – Yahoo! is based on linux, whilst Microsoft use their own technologies. You’re looking at a couple of years, especially if MS tries to convert Yahoo! to using its technologies too, in the way it did with Hotmail. Then there are decisions about which web portals to keep and which to let wither and die.

All the while Google is innovating, improving its current offering so that it is even further ahead. Then it will be focusing on the future, especially the mobile phone arena – what with Android software for handsets and bidding for spectrum. Localised search, based on your current position, search results on your TV determined by your search history and viewing patterns and more. Then there are the corporate backroom deals with other companies with web presence to supply advertising, which is where the bigger money is.

This isn’t a game for a combined MS and Yahoo! to win. They’re going to be focusing on (soon outmoded?) PCs and maybe even trying to prove their search results are more relevant than Google’s. This is Google’s game to fumble and lose – they have won the public’s hearts and minds. Only a sea change in public opinion is likely to challenge Google’s position – but that is possible if Google is perceived as abusing their position of trust. They have to stick with doing no evil and being fair in their use of private information.

It’ll be interesting to see how it plays out… Microsoft has to make it work and I see it being a bumpy ride. Maybe the biggest barrier to success will be a lack of focus, knowing it wants to be successful but not really at what. “Everything” is too simple a response and certainly no answer.

UPDATE: Yahoo rejects the Microsoft bid saying MS “massively undervalues” the company:

“The company is unlikely to consider any offer below $40 per share…It’s unclear whether Microsoft would be willing to pay such a premium, which would increase the value of its original cash and stock bid by more than $12 billion.”

Here we go…

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