Carefully and Promptly

This is just the start of the year, yet, the atmosphere is already heating up.

In the online advertising market, in particular, it is growing at a very fast pace from over $40 billion in 2007 to a projected $80 billion by 2010. Expectedly, advertisers around the world will double their spending on the Internet during the next three years as more people get their news and entertainment on the Web and mobile devices instead of television, radio, newspapers and magazine.

But there is another recent story which can probably change the technology landscape of the future - Microsoft and Yahoo! versus Google.

With the recent $44.6 billion unsolicited takeover bid of Yahoo! by Microsoft, both icons in the technology world but are losing much in the arena of online search, it is indeed a bold step to challenge Google in the Internet universe with more than 50% global leadership and market share.

As stated by Microsoft CEO Steve Ballmer in his letter to Yahoo! last January 31, "We believe this proposal represents a unique opportunity to create significant value for Yahoo!'s shareholders and employees, and the combined company will be better positioned to provide an enhanced value proposition to users and advertisers".

Sure, they can maximize all the benefits of this merger or I would rather say an acquisition, but this sort of urgency on the part of Microsoft seems to indicate that the once-puny online search engine called Google, is still unbeatable and taking more profits than what they both can generate from Internet search and advertising.

In terms of figures, Microsoft had online revenue of $863 million, compared with $4.8 billion at Google. Yahoo and Microsoft together had more than $2.6 billion in revenue, still trailing well behind Google but in a far stronger competitive position.

On the part of Yahoo, "it has been struggling to attract more advertising for quite some time eventhough its Web site attracts one of the biggest audiences, and will have to cut 1,000 jobs early this year." A clear development that co-founder and CEO Jerry Yang really needs to do more and not just to catch up with Google, especially with the reported 23 percent drop in its fourth-quarter profit and a tepid outlook for 2008.

Their reply last February 1 was that they will evaluate this proposal carefully and promptly in the context of Yahoo!'s strategic plans and pursue the best course of action to maximize long-term value for shareholders. It did not specify, however, how long the review process would take and vaguely said “it can take quite a bit of time.”

If this deal will be consummated, it would be by far the largest acquisition in Microsoft's history, eclipsing last year's $6 billion purchase of online ad service aQuantive.

Whether Microsoft with Yahoo! will be successful or not, only time can tell. In the meantime, many believe that Google will continue to dominate the Internet and possibly even in the mobile world with the introduction of their OpenSocial and Android technologies last year.

For me, this will still be an exciting development especially if this will push through. It will also be one of the biggest stories for 2008.

But what's more important is if it will be achieve the following:

• something that will create more innovation and not limiting the competition
• provide better service and competitive to what the others are offering
• lower their costs and integrating their processes, and
• if it will greatly benefit their respective shareholders, employees, partners and clients

So like what an old adage would say, "if you can't beat them, join them."

Expect more developments of this story in the coming weeks...

Sources: Yahoo!, Associated Press, Information Week and NY Times.

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