Microsoft offers 44.6bil to yahoo!
According to the Adweek article published on Feb 1, 2008, Microsoft has offered to buy Yahoo! for 44.6 billion dollars. To me this seems like a terrible idea for Microsoft. The article says that this is a move by Microsoft to “make gains in the online war for ad dollars.” Maybe I am not so intuitive to realize what Microsoft could bring to the table in order to improve Yahoo’s market share for advertising.
Their action is to counter the fact that Google continues to grow while Yahoo! remains stagnant. According to the article Google has a 59% of the United States search market while the proposed buyout of Yahoo! by Microsoft would only create a 32% market share.
Is it really worth it to pay so much money for something that could turn out to be a flop? The article sites Google’s loyal user base, advertising, and publishing is creating a “virtuous cycle” of continuous growth. This cycle is the most significant obstacle that Microsoft/yahoo! would have to overcome in order to make their buyout profitable. Microsoft cites that with the acquisition they have the means to bring innovating breakthroughs for consumers and advertisers. Is this really the way to draw and draw consumers and advertisers to your search engine? The amount of Google faithful users will not decrease dramtically if Yahoo! and Microsoft do emerge with a slightly superior Yahoo! The amount of users that Google has access to will continue to draw more advertisers than Yahoo! and Microsoft together. It will take a website that is far superior to Google to change advertisers perceptions as well as consumer’s.
(In my personal opinion: This seems to be a lot to overcome considering they just released an operating system that had most people downgrading within days. Mixing up two companies who are loosing users in an attempt to gain market share and increase profits seems like a bad idea to me. Yahoo! should refuse Microsoft’s offer and continue to find ways to improve their market share.)
posted by Andrew Pajak @ 2:26 PM
2 Comments
2 Comments:
This is also indicative of the growing importance of internet as a medium of advertising. With more and more people turning to internet for their news and entertainment, marketers are shifting more of their total advertising budget to online, in turn forcing internet giants Microsoft and Yahoo! to act to save their market share.
Everyone is struggling to make money online; successful models are difficult to come by. It's own model -- namely, attempting to bludgeon the public into using its inferior browser, directing unsuspecting surfers to its boring portal and even buying up as much content as possible -- having failed, Microsoft is now attempting to emulate the more successful Google model. No surprise there.
The drive for online success is about ad dollars -- no doubt about that either. Yahoo! had the advantage of time many years ago, but their inferior product didn't generate the kind of ad revenues you might expect. I don't trust Microsoft to improve the product enough to make Yahoo! competitive. With the help of Microsoft, however, Yahoo! could become the net's next COMPUSERVE :-)
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