There's no doubt that Microsoft's announcement that they plan to take over Yahoo is going to have a huge impact on internet marketing. For several years now, Google has run away with the show, even though Microsoft had something in the region of a $40 billion war chest and Yahoo had several years head start on Google in the first place. Neither have been shaping up quickly enough to significantly dent Google's market share.

So now it seems Microsoft and Yahoo are to combine forces. This scale of merger though will be fraught with pitfalls and dangers. In the short term, Google will - I believe - actually GAIN market share by being in relatively calm waters. Historically, mergers and acquisitions have always had trouble proving themselves. This one, though, is clearly a monster. Steve Ballmer, CEO of Microsoft, says that the combined company will create $1 billion in savings. But at a purchase price of $44 billion, that would take 40 years to stand up to an accountant's balance sheet. There has to be more. I guess there is - Yahoo is profitable for a start. But the real challenges for the giant Microsoft giant are two-fold:

1. Merging the technologies
2. Gaining market share

I see trouble ahead in both these areas. Microsoft's PPC technology is, in many regards, superior to Yahoo's. It has demographic targeting and many other bells and whistles. On the organic side though, Yahoo's search engine has stood the test of time, in spite of Google battering. As an aside, I also heard today that Eytan Seidman, who heads up the organic side of Microsoft's engine is moving on to pastures new. My guess is that he is high enough up the Microsoft food chain to have had some inkling of the news that was about to break. If he is leaving then my guess - and it can only be a guess, since the news only broke a few hours ago about the takeover, is that Yahoo's organic engine will be the dominant technology in the long run.

There is one other fascinating aspect to this merger. Yahoo has a considerable amount of information about its user base, which - cleverly used - could dramatically improve Microsoft's ability to target users by demographics. Google has not yet managed to come forward with products that achieve this. However, Google's takeover of DoubleClick may well give them comparable ability.

For internet marketers, it's bad news in the long run. Three dominant suppliers has to be better than two.


Dixon Jones