Yahoo! is mad to turn down Microsoft

Feb 12 2008 By Chris Tomlinson

Last week Microsoft made a $44.6 billion bid for the world's most famous exclamation mark!

Admittedly there is the word Yahoo attached to it, along with 22 per cent of the world's search engine market.

But will Yahoo! sell to Microsoft, should the US authorities allow the transaction, and do any of us really care?

Google cares a lot. With a 62 per cent share of the world online search advertising market, Google's two closest rivals are mere specks in its rear view mirror.

But combine Microsoft's 9.8 per cent share of the market with that of Yahoo!'s, then add Microsoft's AdCenter technology, and suddenly Google has an eighteen-wheel juggernaut steaming up behind it.

Now as much as we all like to hate Microsoft, in this instance it is Google's impending monopoly we should be scared of.

Advertising budgets are moving online faster than a bad joke around Facebook, leaving Google positioned to be the dominant media owner of the next decade.

That's not good for advertisers. Google's prices have been steadily increasing thanks to advertisers bidding against each other for an already limited amount of inventory.

If anything, US anti-trust officials should encourage this acquisition in an attempt to give Google some healthy competition.

The merger would be good news for advertising agencies too. One of the biggest barriers stopping agencies from spending their clients' money anywhere other than Google is the extra effort involved. Setting up and managing a pay-per-click campaign can be torturous.

You can multiply that torture by three if you want to spread your clients' advertising budget across Yahoo! and Microsoft's 'Live Search' too, each with their own ad serving technology and complex user interfaces. The general consensus is that the Yahoo! interface is the worst and Microsoft's AdCenter is the best.

Given its ease of use and the extra marketing reach the 'MicroHoo!' plat-form would give, the costs of using this second platform would be justified.

But does Yahoo! have any choice but to sell?

Given the alternative - an inevitable slip into irrelevance - investment is needed, and companies walking around with $40 billion in their pockets are hard to find. Yahoo! shareholders will no doubt be urging the board to sell given the generous nature of the Microsoft offer.

Should they accept it, it is uncertain how Yahoo!'s employees and customers, not known for their love of Microsoft, will react. Some Yahoo! developers I know will need to go into therapy if they wake up one morning and find they have become a Microsoft employee.

And many Yahoo! users have been looking for the impetus to move to Google's frankly better free email services.

And what will happen to the famous Yahoo! name? No doubt some of Yahoo!'s services will be taken behind the Redmond sheds and shot should the deal go through, but Microsoft would be mad not to keep the Yahoo! brand alive given its pioneering legacy in both search and the use of the exclamation!

* Chris is head of digital at WAA. Email chris.tomlinson@waa.co.uk