Is Microsoft + Yahoo! Greater Than Google ?

According to the New York Post, Microsoft has asked Yahoo! to enter formal merger negotiations. Although these companies have talked about joining together previously, the Post reports that Microsoft is now more serious about a merger based on increasing pressure from Google. The potential creation of a Microsoft-Yahoo! conglomerate raises the question - how would the combined company compete with leading search engine Google?

Google certainly has the current edge in online searches and advertising. The term "googling" has become synonymous with online searches, akin to "Xeroxing" (making photo copies) and "FedExing" (sending a package overnight), with Google being the most widely used search engine. Google's large popularity has translated directly to its bottom line. According to Google's first quarter results press release, Google continues to see double-digit revenue growth, with revenues increasing 63% from the previous year, towering over Microsoft's revenue increase of 32% and the Yahoo! revenue increase of 7% during the same period.

In addition to its gains in revenue growth, Google is also a technology leader, with its complex search algorithm considered by many to be the best in the industry. In addition to recently purchasing internet advertising company DoubleClick, Google is in the process of developing internet-based software which would compete with Microsoft's Office package.

In comparison, Yahoo! is the most visited site on the internet. Even with this distinction, Yahoo! is working to determine how to bring more users to its search engine. Google, at 49.2% of all internet searches in July 2006 according to Nielsen/NetRating, has more than double the number of internet searches than Yahoo! (23.8% of all internet searches). If Yahoo! were to join with Microsoft to become Microsoft-Yahoo!, the combined company would put a dent in Google's search engine domination (Microsoft's MSN.com has 9.6% of all internet searches). This would allow the merged Microsoft-Yahoo!, with a larger overall share of the internet search market, to potentially demand a greater share of the internet advertising market as well.

The Microsoft-Yahoo! merger would bring additional advantages for the combined company, although this could be at the expense of some of its current workers. Microsoft is known to be the industry leader in software development. A merger with Yahoo! would bring Microsoft's technology skills together with Yahoo's internet development savvy. This would create not only idea synergy, but also cost synergy if overlapping staff members were reduced, which is most likely the case when companies merge.

C.M. Paulson is a freelance writer based in Pittsburgh, PA. In addition to receiving her MBA from the University of Pittsburgh's Katz School of Business, Ms. Paulson worked for almost ten years for two Fortune 100 companies in a variety of analytical and management roles.

Source: New York Post