Inside Microsoft’s Bid for Yahoo
February 11, 2008
As usual, Microsoft is trying to play catchup and boost their position in the marketplace by trying to acquire rather than innovate. Microsoft recently announced that they’re willing to plunk down (ready for this?) $44.6 billion dollars for a hostile takeover of Yahoo; the web’s second leading search provider (among other things).
Microsoft owns and operates their own search portal (MSN) which constantly ranks far behind Yahoo and even farther behind the world search leader–and ever dominating internet giant–Google. Even if (BIG if) Microsoft is allowed to acquire Yahoo, they’ll still be far behind their target. In fact, Google might even retain twice the overall search traffic after an acquisition is completed. That’s a massive hurdle to overcome when you’re already behind.
So, why would Microsoft invest in such an effort when they’ve clearly lost and their web glory days are but a memory? The answer is within the clouds. Specifically “The Cloud” which is the term that’s been given to the web’s next big growth area.
“The Cloud” is a term that refers to “cloud computing” which allows consumers to use web-based applications to share photos, create documents, run web-based applications similar to traditional apps and manage their calendars. In the past (Microsoft anyone?) consumers purchased applications that ran on their computer hard drives. Those days are not completely over but the days are numbered. All three competitors we’ve mentioned are ramping up to become the owner of “The Cloud” and (as Microsoft has demonstrated) there is BIG, FAT money that will be rewarded to the winner.
This is why Google is threatened. Microsoft has demonstrated it’s ability to create and market software and they have the bank account to back it up. Yahoo is currently the second leader in search (far behind Google) plus they’ve done an adequate job building their Yahoo portal around many of the important “cloud” applications. With sites like Flickr.com and their powerful “My Yahoo” portal that provides calendars, email and more they’re well positioned. Millions of people have a Yahoo account that they use for email and other things which is an intriguing base for a Microsoft aquisition.
All of this is just a dream at this point; a bad dream actually. Thanks to U.S. and European regulators the merger may not go through which is good news in my opinion. Europe’s top antitrust enforcer, Neelie Kroes has had Microsoft on her target list for years and it’s a good bet that she’s already all over this.
So what happens if the merger doesn’t go through? Currently, Yahoo is set to officially reject the offer. Microsoft will look to compete and aquire and continue to drag along behind the leaders while they watch and steal ideas and hope to catch the scraps as they fall. Microsoft’s CEO Steve Ballmer will say “Well, we tried.” and he’ll blame it all on the regulators.
If it does go through? Well, they better start to step it up right out of the gate to catch Google. They’ll need to retain their top talent and sell them on the “new and exciting future of the company.” The ultimate embarrassment would be losing to Google after spending over $44 billion and losing. Yes, that’s 44 multiplied by 1,000,000,000 plus an extra $600,000 of Bill’s lunch money. Ouch.
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