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No more Micro-hoo

By / May 4, 2008



Yesterday, Microsoft withdrew its bid to buy Yahoo. Now that the deal has fallen through, the past three months kinda seem like a silly game of Ping-Pong – with the press watching anxiously as the ball zipped back and further.

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First, Microsoft surprises everyone with a $44.6-billion unsolicited offer to buy the rival Internet firm. Ping! Yahoo rejects the bid and starts shopping around for other offers. Pong! The software giant threatens a hostile takeover. Ping! Yahoo pleads with stockholders to stand strong. Pong! Microsoft ups the offer to $47.5 billion, about a 70 percent premium on the original stock price. Ping! Yahoo demands $53 billion. Pong!

Now that the game’s over, who won? Some analysts are suggesting the winner is Google.

After all, everything online revolves around how many people cruise through your site – and therefore look at the ads. Google still grabs about 65 percent of search engine hits. Yahoo attracts 21 percent. Microsoft only gets 9 percent.

But Yahoo has something that Microsoft has had a hard time capturing: Flickr, del.icio.us, Yahoo Games, Yahoo Music, and all of the other branches of the Yahoo family tree that are ripe for advertisements. Similarly, Google has Gmail, Blogger, YouTube, Google Maps, etc.

Rather than develop its own services, Microsoft wanted to just buy some that were already successful.

“However, that assumes that the combination of Microsoft’s and Yahoo’s DNA would have created a top athlete, not a corporate Frankenstein,” writes the BBC in its news analysis.

As the BBC points out, Mr. Ballmer has hinted that he no longer thinks a Micro-hoo hybrid would help either company in their fight against Google. In fact, Ballmer’s letter to Yahoo mentions that one of his reasons for walking away was Yahoo's plan to team up with Google by paying the company to use its ad platform.

“In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo! undesirable to us for a number of reasons,” Ballmer wrote in the letter.

Regardless, Yahoo must be happy that it survived the potential takeover. But it has better get its act together, lest another hungry tech giant tries to take a swipe at it – or worse, Google gobbles up so much market share that Yahoo starves.

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