3 reasons for MS’ bid on Yahoo!

What on Earth makes Microsoft want to bid 44B USD for the old portal of Web 1.0, Yahoo!? Well, there are some very good reasons for it, and I want to mention 3 of what I consider to be the most important ones here.

The first one is obvious: Google. Sergey and Larry’s company have grown so strong that they are posing a real threat to Microsoft going forward. For several reasons. First of all they have captured the online advertising market with a model that Microsoft is most certainly quite envious of. Secondly they are moving into territoty, Microsoft considers to be their home turf, so Steve Ballmer & co. simply has no choice but to go on the offensive.

The second one is China. China is an interesting market to Microsoft, but somehow it’s not so easy to really get a grip on the market. Yahoo! has a strong position there through the partnership with Alibaba.com - the huge countrys leading commerce portal - and so ownership of Yahoo! is a was to get a ‘quick’n'dirty’ access to this huge market. It’s definately something Ballmer wants - and is prepared to pay good money for.

The third - and perhaps really the most important reason - is communications. A lot of people speculate that the internet advertising game is all about search. I disagree. Search is huge, but a vastly underserved market is communications. People spend a lot of time communicating with each other, and between them Microsoft and Yahoo! is going to have something that if it’s not a defacto monopoly is nevertheless a very, very strong and dominant market position. A position from which they can innovate new monetization schemes - and thus profit.

All in all it may not be such a bad idea for Microsoft to go after Yahoo! after all.

Vad NU! is a consultancy company owned by Mads Kristensen and specialized in helping clients take advantage of the business opportunities created by new media. Click to learn how I can help you and your company.