Microhoo!
By Simon Bisson & Mary Branscombe in Editorial
Posted in Uncategorized on
Anyone who’s listened to me rant over the last couple of years will have heard me say that I expect Microsoft to takeover Yahoo!. With Google’s dominance over search, and Yahoo!’s success at what Microsoft wants to build into Live, there’s a certain logic to a merger of the two businesses. Yahoo needs the R&D boost that Microsoft can give it, and Microsoft needs the online presence of Yahoo!.
I wasn’t surprised to see that Microsoft has made a formal offer to Yahoo!, offering $44.6 billion for the company.
Microsoft’s been playing nice with Yahoo! for some time. It’s Windows Live Photo Gallery handles uploads to Flick, andWindows Live Messenger can talk to Y! users. The love goes both ways too, as Y! is one of the first applications to really take advantage of the Vista UI enhancements.
Reading Steve Ballmer’s letter to Yahoo! this morning I noticed a couple of quotes.
The first is the one everyone’s expecting. Microsoft needs Yahoo! to compete with Google:
While online advertising growth continues, there are significant benefits of scale in advertising platform economics, in capital costs for search index build-out, and in research and development, making this a time of industry consolidation and convergence. Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers. Synergies of this combination fall into four areas:
Scale economics: This combination enables synergies related to scale economics of the advertising platform where today there is only one competitor at scale. This includes synergies across both search and non-search related advertising that will strengthen the value proposition to both advertisers and publishers. Additionally, the combination allows us to consolidate capital spending.
Microsoft has been talking about online advertising as a key play for some time. There’s a lot of advertising money out there, and even if you add in the efficiencies of online over other mechanisms, not enough if it is going to the online side. Google may have a lead at the moment, but it’s one that can be eroded. Besides, there’s enough money out there for everyone to do very well thank you.
The second quote is, for me, the more interesting:
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