What’s important is 
that Yahoo! – like its fiercest competitor and market leader, Google – has announced that it will extend the Internet advertising model to the mobile environment. In this case, the combine could derive huge synergies through a combination to provide Yahoo! access on Microsoft Windows Mobile smartphone platform. Microsoft may be able to leverage the strengths of its core Windows and Office businesses, by drawing consumers to its website.
But the main strategy behind the proposed takeover is to somehow walk away with a huge slice of the global online advertisement market. According to experts, online advertisement is likely to grow at a significantly phase; it will double from $40 billion in 2007 to $80 billion in 2010. In this context, Yahoo!, with a huge presence in online banner ads, does provide Microsoft with a compelling proposition. And it is the only way that Microsoft can even ever hope to catch up with Google, which currently enjoys a huge 75% share of the paid search revenues worldwide. As Kevin Johnson, President (Platforms & Services Division), Microsoft, sums it up: “The combined assets (of Microsoft and Yahoo!), and the strong services focus of these two companies will enable us to achieve economics of scale, while reaching R&D critical mass to deliver innovation breakthroughs.” He adds that “the industry will be well served by having more than one strong player, offering more value and real choice to advertisers, publishers and consumers.”
Despite the apparent benefits of the Microsoft-Yahoo! deal, there are some analysts who continue to remain apprehensive and wary. Andrew Frank, Research VP, Gartner, is one of them. “Although the synergies between the two companies are certainly great, the merger also raises the question of how effectively the two firms will be able to continue operating during their integration period. The online advertising business requires significant levels of account service and even the perception of a diversion could wind up delivering business to their competitors,” he explains.
An analyst at Yankee Group agrees, “Media companies and technology companies mix like oil and water. All mergers are difficult, and Microsoft is going to have to make some major changes in corporate culture in order to successfully execute on this acquisition.” The story of AOL and Time Warner proves how culture issues can derail any merger. Studies by consultancy firms have proved that culture and integration-related issues normally turn out to be the most critical in any mega M&A.
If this wasn’t enough trouble, Microsoft will need to tackle both Yahoo! and Google to pave the way for a successful acquisition. Yahoo!’s CEO Jerry Yang is not in a definite mood to tie the knot with Microsoft. Realising that Microsoft is willing to pay a huge amount, Yang will probably try to woo other suitors to start a bidding war, and extract the best price possible. At the same time, market leader Google will leave no stone unturned, and no optic fibre dissected, to nip Microsoft’s M&A in the bud.
In fact, the American media is speculating that Google may play spoil sport to scuttle Microsoft’s attempt to buy Yahoo!. Media reports suggest that Google CEO Eric Schmidt called up Yang, and offered him the option to collaborate with Google, instead of Microsoft. Although Yahoo! had not publicly replied to Google’s proposal, some analysts believe that combining with Google is a better deal. A Google-Yahoo! deal will enable Yahoo! to outsource its advertising functions to Google and focus better on segments like mobile applications, social networking and content.
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Source : IIPM Editorial, 2008
that Yahoo! – like its fiercest competitor and market leader, Google – has announced that it will extend the Internet advertising model to the mobile environment. In this case, the combine could derive huge synergies through a combination to provide Yahoo! access on Microsoft Windows Mobile smartphone platform. Microsoft may be able to leverage the strengths of its core Windows and Office businesses, by drawing consumers to its website.But the main strategy behind the proposed takeover is to somehow walk away with a huge slice of the global online advertisement market. According to experts, online advertisement is likely to grow at a significantly phase; it will double from $40 billion in 2007 to $80 billion in 2010. In this context, Yahoo!, with a huge presence in online banner ads, does provide Microsoft with a compelling proposition. And it is the only way that Microsoft can even ever hope to catch up with Google, which currently enjoys a huge 75% share of the paid search revenues worldwide. As Kevin Johnson, President (Platforms & Services Division), Microsoft, sums it up: “The combined assets (of Microsoft and Yahoo!), and the strong services focus of these two companies will enable us to achieve economics of scale, while reaching R&D critical mass to deliver innovation breakthroughs.” He adds that “the industry will be well served by having more than one strong player, offering more value and real choice to advertisers, publishers and consumers.”
Despite the apparent benefits of the Microsoft-Yahoo! deal, there are some analysts who continue to remain apprehensive and wary. Andrew Frank, Research VP, Gartner, is one of them. “Although the synergies between the two companies are certainly great, the merger also raises the question of how effectively the two firms will be able to continue operating during their integration period. The online advertising business requires significant levels of account service and even the perception of a diversion could wind up delivering business to their competitors,” he explains.
An analyst at Yankee Group agrees, “Media companies and technology companies mix like oil and water. All mergers are difficult, and Microsoft is going to have to make some major changes in corporate culture in order to successfully execute on this acquisition.” The story of AOL and Time Warner proves how culture issues can derail any merger. Studies by consultancy firms have proved that culture and integration-related issues normally turn out to be the most critical in any mega M&A.
If this wasn’t enough trouble, Microsoft will need to tackle both Yahoo! and Google to pave the way for a successful acquisition. Yahoo!’s CEO Jerry Yang is not in a definite mood to tie the knot with Microsoft. Realising that Microsoft is willing to pay a huge amount, Yang will probably try to woo other suitors to start a bidding war, and extract the best price possible. At the same time, market leader Google will leave no stone unturned, and no optic fibre dissected, to nip Microsoft’s M&A in the bud.
In fact, the American media is speculating that Google may play spoil sport to scuttle Microsoft’s attempt to buy Yahoo!. Media reports suggest that Google CEO Eric Schmidt called up Yang, and offered him the option to collaborate with Google, instead of Microsoft. Although Yahoo! had not publicly replied to Google’s proposal, some analysts believe that combining with Google is a better deal. A Google-Yahoo! deal will enable Yahoo! to outsource its advertising functions to Google and focus better on segments like mobile applications, social networking and content.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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