Microsoft Heart Yahoo!

Well we’re at it again. The rumor mill and meme trackers are going nuts because of a New York Post article today. Once the WSJ picked it up it suddently became legitimate – even though Microsoft and Yahoo! have both denied comments, as expected. We’ve seen this scenario run through before but it seems nowadays it’s more crucial for both companies. Can’t beat Google on your own? Buy the other enemy and take on Goliath.

Is this a good idea?

The answer, simply, is yes. As I mentioned in my post “Why Google, Yahoo, and Microsoft are NOT Competing“, Yahoo! and Microsoft provide complementary (not conflicting) services when it comes to their web strategy. Yahoo is great at content creation and Microsoft owns the content delivery space. It’s a natural fit.

Secondly, consolidating advertising platforms and efforts will create the first viable competitor to Google’s behemoth cash cow. This is especially important due to Google’s recent acquisition of DoubleClick.

Third, and I think least important (many, many people disagree that this is least important) is the combination of search engines will increase the combined market share to ~ 27% (compared to Google’s ~65%).

Will this work?

The answer, simply, is absolutely not. Why you ask? While both companies provide complementary products and services the corporate cultures do not mesh. I guarantee a harsh reaction by many Yahoo-ites should this merger go through. That could mean a lot of Yahoo! employees jumping ship to possibly head Google’s way.

Secondly I think it will be nearly impossible to integrate the various products and services. There will be arguments between the two teams over which pieces of functionality, branding, etc to keep. Not to mention both systems are built on completely different brands of code bases. Beyond that integration of different business models, ie ad models, will be near impossible.

What should they do?

I think a strategic partnership is a much better idea. Team up on Google. No sense in dropping $50 billion (WSJ’s reported value of Yahoo!) on an acquisition that wont work. They can accomplish all the features above that make this a good idea through a partnership.

More to come on this subject as it unfolds…

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