Wednesday, February 20, 2008

Microsoft+Yahoo > Google


Last week Microsoft offered to buy Yahoo! for $44.6 billion in cash and stock. This represents a 50% premium for shareholders, and indicates Microsoft's anxiety to beat Google. In my view, it also represents a tacit admission from Microsoft that Windows Live, MSN, etc., are all failing to win market share. As the Nielsen Online report indicates, Google is still comfortably controlling the market, and that's in spite of the fact that MSN/Windows Live are default home pages are virgin Vista/Internet Explorer installations.
This is a big play, even by Microsoft's standards, and is a sure indicator that Microsoft recognises that search is the key battlefield for this decade. Search is the big driver for all online marketing and content. Microsoft's increased muscle in this market, will paradoxically increase customer choice, and hinder Google's hegemony.

From an agency point of view, the biggest problem we face with Yahoo and Windows Live is poor programmatic interfacing. I'm hopefully Microsoft will throw similar resource at a decent API for Windows Live and Yahoo!. If you they couple the API with better incentives for intermediaries, large scale advertisers will have a realistic alternative to Google.

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