Sunday, February 3, 2008

Microhoo merger: what's it all about Stevie?

Microsoft's $44B bid for Yahoo is a recipe intended to put a dent in Google's armor, right? That's what all the headlines are about. But what doesn't sell papers is this: there's enough business out there to build ten Google-sized companies over the next decade or so. The potential in pay per click advertising is that huge. So, why do we need a merger between these two behemoths? Because Microsoft doesn't have Yahoo's search and ad capabilities. As my wise business professor Bruce Greenwald once explained it to me, the smartest companies are the ones that take their attention away from hammering away at their competitors in head-to-head combat, and instead figure out how to grow and keep their customer base. And this is exactly what Microsoft and Yahoo are doing. By joining forces, they can carve out a large and profitable swath for themselves in the space that has made Google wealthy: online advertising.

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