Sunday, February 10, 2008

Techcrunch: Microsoft and Yahoo Merger

Techcrunch: "Big mergers tend to fail more often than not, especially when companies are trying to combine operations as opposed to adding on new standalone capabilities. One of Microsoft’s biggest mergers was Great Plains Software, which was a success specifically because Microsoft pretty much left it alone for a couple years and let it operate independently.

Helge: Let it operate independently is not an option with Yahoo!

That is not an option with Yahoo. the merger is a collision waiting to happen. Integration is going to be rough and will slow down the merged company. Nobody believes that a combined Microsoft-Yahoo will be a nimbler competitor than either bureaucratic organization is today on its own.

Helge: MSN might suffer more than Yahoo in the beginning.

Not that any of this matters from Microsoft’s perspective. The logic of the deal is to gain scale as an advertising platform and as a Web publisher. the two go hand in hand. The more Web pages and traffic you have, the more ad inventory you have to sell. Everyone is focused on search, because that is where Google is so dominant today.

Helge: Inventory to sell.

But remember, while search ads make up about 40 percent of Internet advertising revenues, display ads still make up about a third. And that is where Yahoo is strongest. Microsoft needs to bulk up on display ad inventory before Google’s DoubleClick deal goes through. If it can fix search, that would just be a bonus.

Helge: Display ads into context!

A combined Microsoft-Yahoo will help it compete against Google in display advertising, which is still an open game..."
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