Microsoft bids $44.6-billion for Yahoo

This morning’s announcement that Microsoft bids $44.6-billion for Yahoo is causing a lot of speculation.

For my part, I could care less about Yahoo’s or Microsoft’s web sites – I use Google almost exclusively since they’re way ahead of Yahoo or MSN/Live (and when I don’t use Google it’s because someone else is ahead of them which implies Yahoo or MSN/Live don’t even register).

But what does concern me is the effect a “war” between MSN/Live/Yahoo and Google could have on Google’s dedication to it’s cool stuff.

I’m not sure how the industry works, but something tells me nobody makes any money when I visit Yahoo.com or Google.com; or when I sign-up for an account and create a personalized homepage. My understanding is these companies make their money selling ads. But Microsoft also makes their money selling software, hardware, game consoles, etc. Basically, Microsoft has tons of cash sources it can use to undercut Google, who probably depends a lot more on advertising revenue.

What would Microsoft do if they “won” the war? Well, I doubt they would produce cool things like the iGoogle homepage, Google Reader, Google Alerts, etc. And I doubt they make public so many services that people can integrate into their web sites. And I predict a bunch of MS Office Product Managers stomping on the servers that host Google Docs & Spreadsheets (followed by an attempt to use MS Streets & Trips to locate Zoho’s head office and then an attempt to use MS Encarta to figure out why if Indians live in India isn’t India a reserve somewhere in the USA).

So sarcasm aside, I think a successful purchase of Yahoo by Microsoft would lead to the death of the Google we geeks love, because online ad prices will go down and Google will have less cash to fund their 20% projects.

UPDATE Feb 3, 2008: My interpretation of the Google’s blog post on this subject is they are coming to same conclusion as I am – although they clearly but the blame on Microsoft rather than the underlying mechanisms of a free market.

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