Reports are rife about rekindled merger talks between Yahoo! and Microsoft. After similar discussions about 12 months ago, it appears the two technology giants are back at the discussion table. Considering their failure to make inroads into Google’s seemingly unassailable domination of the search market, the new talks might be a case of necessity rather than desire.
Apparently Microsoft has placed US$50 billion on the table in an effort to acquire Yahoo!, but such a deal will be more complex than just big dollars. That said; both technology companies will be seriously considering that a merger might be the only way they gain ground on Google, as both have both acquired and developed heavily over the last 12 months to no avail.
The share market has responded positively to the suggestion of a merger between the two companies, with Bloomberg reporting an 18% increase in Yahoo!’s share price at the mere speculation of a potential deal.
This wont be the first time the two companies have worked together. Yahoo! Search Marketing (formerly Overture) published sponsored listings on MSN for several years. As the search space grew exponentially, MSN pursued an in-house advertising platform in an effort gain a greater share of the lucrative online advertising spend.
Cumulatively, the two companies carry just under 40% of all searches, while Google alone has almost 50% of the market with no signs of decline. Even with a merger, the two would trail Google, but the merger goes far beyond just search volumes.
When you combine all the online real estate and web based services that Microsoft and Yahoo! offer, not to mention the economies of centralising management and technology development, the two would undoubtedly be a more formidable force against the Google juggernaut.
It’s too early to say whether a full scale merger will be the likely outcome, but even if they undertake a partial takeover, or simply amalgamate relevant departments, it could be the impetus to give Google some healthier competition. And more competition is always healthy.