Microsoft and Yahoo

We’ve all read countless articles about the potential takeover of Yahoo by the giant Microsoft Corporation, but just in case you haven’t, here’s the gist: Microsoft offered to buy Yahoo for much more than they are worth, making it nearly impossible for Yahoo to turn down Microsoft. Google (who would be the hardest hit by the merger of the two giants) cries foul and points to antitrust laws at the same time they are talking with Yahoo executives behind the scenes about how to fend off the merger.

I hope that Microsoft is able to buy Yahoo, because I think it would be better for internet users on the whole, and here’s why:

1. Microsoft’s search technology (www.live.com), which now holds roughly 6% of the market share, is actually much better than Yahoo’s search technology. Not only does Live Search consistently return more relevant results, they are less influenced by SEO web spam. You can basically buy your way into the top pages on Yahoo using their “submit express” service. A merger of the two giants would result in better search technology made available to more people.

2. Despite the antitrust jabber that has been going around, a merger would probably result in reduced prices for CPC marketing on the internet (especially with Google). Contending with a single major player as opposed to a pair of search engines would mean that more users would take their CPC campaigns away from Google and over to the new system created by Microsoft. I could be wrong about this, but it seems to me that a merger of Yahoo and Microsoft would actually create more competition for Google (if not in quantity then in quality).

I really doubt the merger will go through, because there are many large companies that stand to lose some major cash from the merger. Many of Yahoo’s top 10 investors also own stock in Microsoft (and of the investors who own stock in both companies, none of them own more stock in Yahoo than they do in Microsoft). Investors usually don’t like to pay 40% more than market value for stock in a company that they already play a major role in. This deal will probably crumble from the inside.