The bid made jaws drop everywhere. Still, it shouldn’t have surprised anyone, given Microsoft’s 18-month-long on-again, off-again attempts to partner with or acquire Yahoo. It leaves the rest of us asking two questions: what are the deal’s implications? And will it actually go through?
My first reaction when I heard the buzz about the deal was that there hasn’t been this much fuss about a potential merger since AOL acquired Time Warner for $182 billion back in 2001. Certainly, there hasn’t been another Internet deal that big since then. It would be the biggest deal in Microsoft’s history, dwarfing the previous record-holding $6 billion purchase of aQuantive.
That’s all the more reason we should take a close look at this deal. You know every Yahooligan is doing so. Some of them are shuddering. Others, according to a comment on a Valley Wag story, are vowing to stay and work to make any cultural changes to the organization “as painful as possible for the new Microsoft directors and division Veeps, short of insurrection.” I’ll have more on that point of view in a bit.
If you have to ask why Microsoft is doing this, though, you haven’t been paying attention to the search arena since Google entered it. In a press release on its web site, Microsoft notes that “The online advertising market is growing at a very fast pace, from over $40 billion in 2007 to nearly $80 billion by 2010…Today this market is increasingly dominated by one player.” That one player is Google, which by some estimates garners two-thirds of search traffic, leaving Yahoo and Microsoft with a combined paltry 28 percent of the market.
Microsoft clearly wants a piece of that pie, and its own efforts haven’t enabled it to secure the space. So it is turning to the embattled veteran in the field, hoping to capture that magic and develop some synergies that will help it defeat big bad Google. Anybody who automatically thinks a deal this big, between two companies so different, will give you great synergies didn’t learn any lessons from the AOL-Time Warner merger I mentioned earlier. The most polite word I’ve heard to refer to that deal recently was “disaster.” And it was trumpeted at the time as the creation of a major media powerhouse combining old and new. Will “Microhoo” or “Yacrosoft” be any different?
Search Engine News 
