Sunday, February 3, 2008

Giant ( Microsoft) awakened by Google, Bids for Yahoo

Well the giant finally woke up or rather was awakened by Google. I have said this many a times in my earlier articles, that Google is giving sleepless nights to Microsoft. So the acquisition bid comes as no surprise to me. Wow! this is one hell of a deal. Very tempting, will yahoo embrace it or will it brave the chest and take the bullet. To me, the merger makes more sense to both yahoo and Microsoft. It’s a win-win strategy. Off course, there is lot of upside and downside to this deal.

Microsoft 45 billion dollars deal, if successful, shall become one of the biggest in the history of acquisitions. Microsoft sees yahoo as the best option available to counter Google dominance in the search market. Though the deal has not been accepted with enthusiasm, I still see lot of potential in this deal. Also, there are rumors of News corp. bidding for yahoo. Who will win; will be out in couple of days.

So what is this deal all about? Search dominance or Internet social graph dominance. Google is way ahead in the internet search market. It has around 65-67% of the market share. Yahoo has around 20 and MSN trailing way behind both of these companies with 6-7% of the market. So the combined market share of Microsoft and yahoo still is way behind the Google might.

Though many observe that the deal is more to do with search than anything else. I beg to differ here; partly because yahoo dominates the social graph compared to Google. I guess the combo of Microsoft and yahoo's social graph should surpass any of the other internet giants. Despite the fact that yahoo has not been able to monetize its social graph; iam sure Steve Ballmer has all the strategy in place to monetize the social graph. So it’s going to be a paradigm shift for Microsoft to move from PC world to the internet world.
What is stopping Google from bidding? Well, if Google were to do so, a slew of anti-trust would emerge

Here is some data of search and applications (courtesy Hit Wise). Looking at this data, it’s very clear, Microsoft can benefit from yahoo’s social graph more than the search arena.

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