Wow, Could This Really Happen?

It was reported by the New York Post that Microsoft had asked Yahoo! to enter formal negotiations for an acquisition which could be worth $50 billion.

Microsoft sees in Yahoo! the potential to leapfrog it’s development efforts in the area of search and online advertising revenue generation. Yahoo! meanwhile has suffered with lower earnings.

Microsoft and Yahoo! are both having greater difficulty competing against Google for the online advertising dollars spent. With Google being used by more searchers than any other search engine, Google has consistently increased their advertising revenue, while Microsoft and Yahoo! have both struggled to lure the kind of advertising dollars that shareholders would like.

The recent acquisition of DoubleClick by Google may be the straw that broke the camels back. DoubleClick was a company that specialized in online advertisements. Now that Google has bought DoubleClick, Microsoft is scratching their head, trying to figure out what is the next step they should take to improve their online presence.

Would a merger of Microsoft and Yahoo! be good for the consumer? I’m not sure on this one. With Microsoft making the bulk of their money on the selling of software and operating systems, and also heavily spending in the development of their own search technology and online advertising, it is likely that we would see a merging of technologies between Microsoft and Yahoo! Search, and also the online advertising systems.

The merging of Microsoft and Yahoo! might be good for the online advertisers. By reducing the number of main search portals down from Google, Yahoo!, and Microsoft to just Google and Microsoft, online advertisers could get more bang for their buck.

Is this deal worth $50 billion to Microsoft?

Time will tell.

Jim

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