COMMENT: Microsoft will swallow Yahoo in the end

30 July 2009 2:14 GMT / By Stuart Miles

The deal is done, Microsoft and Yahoo have finally created a merger of sorts, but what does it really mean?

While the business press will claim that someone has sold out to someone else and the markets will probably dip because no hard cash has actually been transferred between Yahoo and Microsoft, the Yahsoft or Microhoo deal in my mind really comes down to Yahoo saying they've had enough. It seems that the web company is on the way out, instead preferring to focus on being a media power house with a truck load of content that it creates (its roots are as a portal remember) and a good advertising sales house which it wants to capitalise on.

From Microsoft's perspective taking on Yahoo's search properties should instantly take Bing from around an 8% market share to around 28%, catapulting the fledgling search engine (it's only 2 months old) into the mainstream, giving it a fighting chance to take on Google and its 65% share.

You can instantly see that Microsoft has the most to gain here even though, from the conference call on Wednesday morning between the two companies, it was Yahoo who seemed to be calling all the shots and leading the announcement.

Either way, the deal, which is unlikely to start taking effect until the middle of 2010 and be fully working until 2011, is likely to have massive ramifications for the industry in both ad sales and how we search the Internet.

With such a long process, that has yet to be still approved, chances are the average consumer isn't likely to notice any difference in the short term. Once the deal has been done are you still likely to want to go to yahoo to search for content, knowing that you can just go to Bing and get the same results? And what about Yahoo's money making directory that is based on individual users paying to be listed? That's a revenue stream gone.

But for me, the Microsoft Yahoo announcement isn't about two companies struggling to take on Google, it's about one company not really wanting to get into media sales (that would be Microsoft) and another fed up with investing money into search and not really getting anywhere with it. After all if Bing could steal a chunk of Yahoo search share in a month, imagine what the situation would be like in a year or even longer.

As for whether or not the two companies will be able to last the 10-year agreement term, I very much doubt it. My belief is that Microsoft will swallow all aspects of a Web Yahoo after it's stripped it dry of content and users. Yahoo will cease to be the search/portal that it once was, but instead become yet another sales house looking to take advertiser's money.

For Yahoo shareholders, maybe a deal where Microsoft bought the company outright almost 2 years ago would have been a better, easier solution after all, as it is, the long road to a painful death looks the most likely outcome.

Via: choicevalueinnovation.com

Full tags

Comment, Software, Microsoft, Yahoo, Search engines