Posted by: nickgerlich | February 4, 2008

MicroHoo

All the tech world is abuzz with the announcement yesterday (01 Feb 2008) by Microsoft and its offer to purchase Yahoo in a cash-and-stock swap of $44.6 billion. Analysts have had plenty to chew on since then, and in typical market fashion, Yahoo’s stock price shot up 62%. And Microsft’s sagged, bringing the proposed deal down to a little below $42 billion.

MicroHooStill, that’s a lot of dough. So much, in fact, that Microsoft is effectively wagering almost the entire personal net worth of Bill Gates. This is not the $5 blackjack table or the quarter slots down at the 7-Eleven. Nope, this is high stakes gambling behind closed doors at Wynn. Microsoft is rolling the dice, and hoping they come up GOO + GLE.

Microsoft needs depserately to respond to the countless advances made by Google in recent years. Their hope is that by bringing Yahoo under their corporate umbrella, they will set the bricks to falling out of the Googleplex in Mountain View.

I just have my doubts that it’s going to happen any time soon. The bricks, that is, not the deal.

Sure, Microsoft needs to do something, and Yahoo certainly needs a savior to lift them out of the pit into which they have fallen. But both have spotted Google such an advantage that it will likely be impossible to catch up…unless Google were to trip over its own two feet.

Google and Microsoft have two very different business plans. The former is primarily a software company, accustomed to making money selling its Office suite and related products, as well as licenses for installing its operating system. Google, on the other hand, is in the advertising business. It gives away online access (via Google Documents) to Word, Excel, and Powerpoint applications, thereby relieving many people of the need to actually own the stuff. A casual look through the Google site reveals a growing array of products and services, most of which are free, and all of which give Google one more foothold inside your machine.

And the more eyeballs Google has, the more advertising it can sell. It feeds off itself. While Yahoo does have an ad revenue model, I doubt it can come close to matching Google. The Yahoo search engine is not as good as Google’s. Final analysis: Microsoft is doing the right thing, but no matter how you slice it, it still won’t be enough to stop Google. Both will survive and thrive, albeit for different reasons. But Google will be the undisputed king.

Ya gotta know da verbs.

Dr “Micro Who?” Gerlich

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