Microsoft has apparently asked Yahoo! to re-enter negotiations for a Microsoft takeover rumoured to be worth around $50 billion (the price has been estimated by Wall Street analysts). It seems that Google’s recent acquisition of Doubleclick (an Internet advertising business) has placed a considerable amount of pressure on Microsoft to come up with the goods to compete. Microsoft was in talks with Yahoo! a while ago and clearly not much came of those talks. Google has changed the dynamic in the industry with its $3.1 billion purchase and that may have been enough to force Microsoft’s hand (Microsoft was an unsuccessful bidder for Doubleclick). According to Mashable, this deal would make sense:
Where’s the synergy? Yahoo has had much more success on the web than Microsoft, and Google increasingly looks to challenge Microsoft with online office apps. There’s search, too: the two companies combined would command 27% of the search market against Google’s 65%. And of course there’s advertising, where Google is also dominant and Yahoo is building out Panama.
Looking at those numbers you still have to wonder if the combined Microsoft-Yahoo! business would really have a chance of beating Google back. Google has a phenomenal advantage over a possible merged business in the search industry and that search industry is driving Google’s advertising business, now enhanced by the Doubleclick deal. Or perhaps not. According to the New York Post, this deal would create a dominant player as far as eyeballs are concerned. Microsoft-Yahoo! may still benefit from Yahoo!’s new advertising platform called Panama and given that the overall gap in online ads would be reduced to around 13%, Google may find itself on the back foot.
As TechCrunch points out, if this deal happens, it will be the biggest ever in the tech sector and one of the biggest in US corporate history. Just think about the price for a moment … $50 billion … R346 billion … that is about a quarter of South Africa’s estimated GDP for 2006.