Well there was a lot of buzz off late about Microsoft trying to have yahoo for luncheon and increase it’s pie in the online advertising world. Amidst all this no one knows whether it was a publicity stunt aimed at showing Microsoft prowess to gulp down a giant, or was it a mutual understanding between Gates and Yang to boost Yahoo’s shares above their present value.
While everything boiled down to nothing, and Yahoo feels it can concentrate on its work. Something that may have been missed out could be why exactly does Microsoft need to take it to their opponent and who the opponent is? Google ,the giant of the internet world. Been around for just ten years now and already claims a 75% share of the internet advertising space to 5% of Microsoft’s.
But is it only the advertising which Microsoft is interested in? it’s not just about Google which Microsoft is worried, it’s hard to overstate how important it is for the company to conquer the online advertising market. Microsoft is phenomenally profitable today with the amount of money it is making through the office packages, .Net platform and its operating systems. But there are companies which are offering such features across the web which people with almost any computer can just log onto the internet and access. Now this all comes free of cost. Like say the Picasa by Google. These free programs require advertisers to finance their sustainability as a free to use product. For example I am providing a free calculator program on my website. To run my website I need to pay a certain amount of revenue to the authorities running the World Wide Web. Then if multiple people use it I need to install multiple servers to meet the demands of ever increasing online traffic. When I’m offering everything for free where do I generate the money from? Yes, here’s where the advertiser’s come into picture. More the advertiser’s I have, more the money I’ll be able to make up for all those free services. Now advertisers don’t just go and advertise on any site. Google is the world’s most used search engine, millions of people use Google to run some search or the other. So Google is obviously more preferred place for advertisements. Now Microsoft’s live search is no match for Google’s search engines prowess. And in this world where Google has become a household name, Microsoft has to come up with something which is much better than Google if it has to have a larger pie of the online business. So it wanted to acquire yahoo for getting revenues out of the online business and come up using the yahoo brand name which is second to Google’s but enjoys only 15% share as compared to 75% of Google.
So is this what Microsoft was looking for? Most probably yes, Microsoft’s closed Source policy, failure of Vista has just started to take its toll on the company. But Microsoft is too big a company to bog down, and going by its huge workforce of talented pool of people, and it’s new initiatives in the web space something big is just around the corner.