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Friday, May 23, 2008

Google-Yahoo! Against Microsoft?

Soon after the challenging Microsoft-Yahoo! merger conjectures, we have here, another interesting news. Google is in for a partnership with their archrival Internet company, Yahoo!. While Microsoft put forward a deal with Yahoo! some time back, which almost came down to a merger, and to MS’s disappointment, was dropped, here is a thunderbolt on its already shattered dreams.

If Google collaborates with Yahoo! or in the future, even decides to acquire the giant, then it will be a nightmare for with Bill Gates. Eric E Schmidt, Google’s chief, said about a proposed alliance with Yahoo! that Google would allow Yahoo! to use their most innovative contextual ad technology within Yahoo search results. This would enable Yahoo! rake in an extra $1 billion every year.

And in exchange, Yahoo!, currently number two in overall searches made in the WWW, would hand over some of its subsidiary services to Google. Eric Schmidt only gave the reply that “We would anticipate structuring a deal to address antitrust concerns.”

And analysts have only a vague idea of the cooperation. Some believe it will only be a supplier arrangement. Meaning, Google supplies its services to Yahoo! and in exchange, purchases some Yahoo! services. Similar to Dell’s supplying hardware to Adobe or Accenture.

Still, some of the concerns raised include the thought that this move by Google is anticompetitive. Google, with the search market share of 60 %, the highest, if shares its strategy of search contextual advertising with Yahoo!, the experts believe that it will reduce the competition. The Yahoo! share of the market is only around 20 % and their ad share revenue falls far behind Google’s.

Google’s superior contextual ad technology and their better market share make them 60 % more revenue from comparable Yahoo! ads. Sad that the giants cannot publicly use the technology of each other, maybe due to their ego. They are, instead, forced to invest too much in developing a similar technology, and failing in it, lose all that money. The same happened here with Yahoo! and Microsoft, who tried to collaborate with each other to shatter Google’s monopoly. But now that Google itself came to the scene with partnership with Yahoo!, it seems Microsoft will be the loser.

Copyright © Gayatri Jayashankar 2008