Over the past few days, the internet search turf has been heating up. And the evolving dynamics are changing at such a fast pace that it is becoming increasingly difficult for analysts to predict the final outcome. The recent bid by Microsoft on Yahoo would not have come as a surprise to anyone as for long it had been talked about. It all started on the 1st of February, when Microsoft, the software giant, made a staggering $44.6 billion offer for Yahoo (at $31 per share – a 61% premium on Yahoo’s previous week’s closing price).
For long, Microsoft, a compulsive monopolist in the software market, has been feeling very uncomfortable with Google’s growing dominance in the internet space. It is no secret that in the internet space, Google had been a clear market leader cornering almost 60% of the web searches on the internet, followed by Yahoo and Microsoft’s MSN Live at a distant 20% and 7% respectively. This enviable position that Google has been commanding has given the company an indisputable control over the advertisement market. And much to Microsoft’s displeasure, Google has been using its monopoly position in controlling the online advertisement revenues to such an extent that it alone manages to corner almost 42% of the ad dollars, which Microsoft, Yahoo and AOL put together earn. And that’s not all, Google’s online ad revenues have been growing almost at 30% annually! Such is the growing dominance of Google that Microsoft for long had become a follower in this virtual duopoly market. So much so that since 2004, for every acquisition that Google did, Microsoft did another.
So as Google bought Marratech, YouTube, Android, Orkut and the likes, Microsoft followed it up with Unified Communications, Soapbox, MessageCast Inc., Facebook respectively. But that’s not all, Google had been giving sleepless nights hitting into Microsoft’s bread and butter software business by offering free solutions. Consecutively, for long, Microsoft had been eyeing an opportunity to strengthen its own position; and what better than this opportunity to bid for Yahoo, and that too exactly when Yahoo had shown disappointing results in January when its share prices fell to a four year low, wherein the company announced its plan to retrench 7% of its workforce.
For long, Microsoft, a compulsive monopolist in the software market, has been feeling very uncomfortable with Google’s growing dominance in the internet space. It is no secret that in the internet space, Google had been a clear market leader cornering almost 60% of the web searches on the internet, followed by Yahoo and Microsoft’s MSN Live at a distant 20% and 7% respectively. This enviable position that Google has been commanding has given the company an indisputable control over the advertisement market. And much to Microsoft’s displeasure, Google has been using its monopoly position in controlling the online advertisement revenues to such an extent that it alone manages to corner almost 42% of the ad dollars, which Microsoft, Yahoo and AOL put together earn. And that’s not all, Google’s online ad revenues have been growing almost at 30% annually! Such is the growing dominance of Google that Microsoft for long had become a follower in this virtual duopoly market. So much so that since 2004, for every acquisition that Google did, Microsoft did another.
So as Google bought Marratech, YouTube, Android, Orkut and the likes, Microsoft followed it up with Unified Communications, Soapbox, MessageCast Inc., Facebook respectively. But that’s not all, Google had been giving sleepless nights hitting into Microsoft’s bread and butter software business by offering free solutions. Consecutively, for long, Microsoft had been eyeing an opportunity to strengthen its own position; and what better than this opportunity to bid for Yahoo, and that too exactly when Yahoo had shown disappointing results in January when its share prices fell to a four year low, wherein the company announced its plan to retrench 7% of its workforce.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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