RSS
Email
SMS
The Deal : Will Microsoft Take Over Yahoo ?
(Rate this article)
Loading ...Email It!
After the HP-Compaq merger and Reebok’s acquisition by Adidas in 2006, a Yahoo takeover by Microsoft is something that interests me more. The news of Microsoft’s possible takeover of Yahoo has been surfacing in the media for time and again. And last Wednesday saw its head rising again. Fortune magazine and CNN Money carried reports about a Microsoft-Yahoo merger.
Absurd as it may sound, the deal makes sense to both the companies
Now Microsoft and Yahoo, both are brilliant, big companies. Making billions of dollars in profits and serving hundreds of millions of users worldwide. As we can see, there are plenty of reasons for them to go solo.
There are many reasons for Microsoft to fly solo:
- Microsoft’s powerful stable of online services (mail and search, mapping)
- It’s 80,000 employees, and all of then ready to make the next big thing
- An extremely profitable operating system and client software business
Yahoo too has good reason to go it alone:
- It’s still very strong in the search market
- An award winning e-mail client and local and online photo services.
Likewise both the companies have made huge strides in mobile services.
Yet there is one compelling reason for them to join forces:
Last year, Google beat Microsoft to take over the internet advertising company DoubleClick and a strategic deal with AOL. Google’s App have been posing threat to Microsoft’s Office suit. An increasing number of people have been using Google Docs, and Google Spreadsheet. Microsoft can see this shift happening and wants its users back. It did announce the web versions of Office, but that didn’t steal any thunder form Google.
On the other hand, the increasing popularity of Google’s Gmail has been making the Sunnyvale, United States headquartered Yahoo feel the heat. The screenshot below shows the comparison of Gmail Vs. Yahoo Mail.
It makes sense for the two companies to join forces and pool their resources togeather to combat Google rather than wasting money by competing against each other. If such a deal happens, the market share of the new entity will still trail behind that of Google, by a much lesser margin. Yahoo-MSN combined has a 38.4 percent of the U.S. of the search market while Google leads by 48.3 percent.
With increasing number of people using the internet and web services for their tasks, the margins from softwares are declining for Microsoft, which is now looking to offset this decline from the Internet ads
Recently Google stole the title of “Most Powerful Global Brand” from Microsoft. And that
seems to have made Gates and the senior MS brigade to sit up and take notice. Visibility and branding plays an important role in the internet advertising business. As the services are free for the users, bringing users to a platform is mostly the play of marketing and branding. Losing titles like these give a serious blow to the Microsoft’s attempt to push its MSN and Live brands as the de-facto standard for everything web.
What Microsoft will bring to the table is its technical expertise. Yahoo will bring its advertising and media sensibilities, combined with its strong user base. The deal will not 
be a merger. It can’t be. Microsoft does not merge with others, it simply acquires them. However, Yahoo’s acquisition will be a bit different. Not just because, it will have to pay in access of $ 50 billion for the deal, but also because to manage the entity, after the deal will be a tough task to deal with. Analysts feel there is a stark difference between the attitude of people at Microsoft and those at Yahoo.
For years now, the two companies have been seeing each other as a rival. For them to suddenly sit togeather and brainstorm on a common problem, is going to take a lot more than just a $ 50 billion check.
Needless to say, the synergies, combined can be a powerful force, which might send some waves at the Googleplex.
Loading ...
Ankit - i have 1 issue. You have shown a Google Trends chart for Gmail vs Yahoo mail.
The concern is that people on Google might not necessarily be searching for yahoo mail because i think customers for both the brands are loyal to the bundle of services that both conglomerates provide.
So you might even find that yahoo mail is more popular on yahoo search than gmail.
Otherwise i enjoyed the analysis!
Thats an interesting Analysis. With the current market dynamics and Microsofts desperation to get ahead of google in online framework, puts the value of Yahoo much more than that. The deal had been floating, right from the time when Google IPO was initiated.
But certainly, the market is gonna change if either of them are gonna acquire yahoo.
google has become the dominant player in the search market nad you want to know an intresting fact ” yahoo was approached by google for a takeover but yahoo did not think that search market will be so huge” i guess they will be pretty mad at themselves
@Harshil
That was a nice idea. I didn’t think of it.
However, I did a quick check for Yahoo Messenger, and Google Talk on Google trends.As you can see, from the link,it reported a far larger number of people using Yahoo Messenger than Google Talk.
So, I guess, people are using “services” which suits them the best. I ALWAYS use Google for search. And use Yahoo Mail for “forwarded” stuff and Gmail for for official and personal mails. Similarly, I prefer to chat on Yahoo, coz I feel more at home with it. Google Talk is good for really-small office chats.
So, probably, that data is not as mis-placed.
@Srivatsan
The news of Microsoft-Yahoo deal has been making rounds for quite some timer now. Microsoft is known to do what it takes to be a front runner in a particular space. Examples from Xbox to Zune all demonstrate this very well. With online advertising space hotting up, Microsoft may very well end up buying Yahoo. If that is what it takes to emerge triumphant.