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And Then There Were Two? A Look at The Microyahoosoft

February 4, 2008 – 3:00 am

No, it will never really be called Microyahoosoft or Microsofthoo or even Yahoosoft but the proposed $44.6 billion bid by Microsoft for Yahoo! was definitely really big news last Friday. It takes two huge Internet players and creates a beast of a company that just might have a chance at slowing down the Google machine. So what’s the potential impact of such a merger? Let’s take a look at some of the obvious and not so obvious synergies:

Search and Advertising Platforms

The most obvious outcome of the proposed merger would be to combine the #2 and #3 players in the U.S. Search Market. According to a CNN article, Google holds approximately 58.4% of the U.S. search market, while Yahoo has 22.9% and Microsoft’s share is just 9.8%. In terms of online display ads, combined Microsoft and Yahoo! would control around a 25% share. This is big business especially since it’s projected that online advertising could reach $60 billion by 2010. Both Microsoft and Yahoo! have been struggling to keep up with Google. Both companies search marketing tools are inferior to Google’s on a variety of dimensions. Combining forces could help both companies share existing research, development, and other resources.

E-Mail and IM

A Microsoft-Yahoo! marriage would combine to create a force in E-Mail and Instant Messaging. Adding a strong Microsoft Hotmail to #1 Yahoo! Mail only creates an even more dominant player. Combing both MSN Messenger and Yahoo! Messenger would allow more users to connect to one another.

Social Media

E-Mail and Instant Messaging creates instant networks that Microsoft-Yahoo! could tap into to use use to their advantage in the larger social network context. Also, a Microsoft-Yahoo! would have a much richer portfolio of web properties. Combined you would have an interest in Facebook (which Microsoft has invested heavily in) and Yahoo! owned del.icio.us and Flickr. Couldn’t you imagine a larger social network being developed that gets integrated with these web properties and overlayed by these e-mail and instant messaging networks?

Mac vs. PC ads

Yes,PC isn’t as cool as Mac. But perhaps the proposed merger could give PC a flashy purple suit just as a shot of Yahoo! culture might be beneficial to Microsoft.

All in all, just some food for thought. We still have a bit of time to consider more effects of the proposed merger — if it does move forward, it probably won’t be finalized until the end of 2008.