Would Microsoft-Yahoo! Mean More Competition?
It is simple arithmetic that would place the combination of Microsoft and Yahoo! in second place behind the no. 1 Google and ahead of AOL. The $44 billion bid by Microsoft to acquire Yahoo! seems to simplify the US online market share race. It is noticeable here that during the year of 2007, Google had nearly $6 billion, while Yahoo! had about $3.4 billion and MSN had $1.4 billion net revenues.
The combination of two of the four giants is seen as a good one; however, the lingering question that industry specialists have in their mind is this: do two losers make a winner? The answer to this thoughtful question needs some analysis and inputs from specialists.
Zorik Gordon, CEO of ReachLocal, says: “Microsoft and Yahoo’s offering would make them much more competitive, but I do think that individually they’ve been losing share. While the combination will help, it doesn’t address why they’ve been losing share.”
According to him, it is clear that even if the bid materializes into a deal, it would not solve the question, which affects both the parties. Google is already trying to have any deal reviewed carefully by regulators and there are some reports also that it is also offering help to Yahoo! to avoid a hostile takeover.
It is clear that Microsoft and Yahoo! have much more to offer than search engines, but still, the popularity of Google search engine is far too overwhelming to drown their market shares. So, again, search would be the main competitive battle-field for them if the bid closes off in positive. There are many powerful areas where the joint venture can do well: Microsoft’s aQuantive division with Yahoo!’s Blue Lithium and Right Media ad segments could create a powerful online ad network for brand marketers and could pose a serious challenge to Google’s adword and adsense campaign. But still, it has been estimated that search ads will comprise 40% of the online advertising market for the next several years.
The outcome of this bid could also affect the advertising rates—online ad prices could rise or fall over time as a result of one player less in the market. There are chances of prices going up due to lesser competitors, but due to price wars, it could come down as well. At the same time, the focus on mobile search can change the market on its head. Quite interestingly, no major player has yet cracked mobile search.
It is clear that there are many questions and issues that still lay unsolved: first one among them is of course the materialization of bid into a deal. If it goes on, the competition for Yahoo! and its search business promises to make the market even more interesting, and industry players can expect a lot of changes in the trends of the market.
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