Today’s announcement by Microsoft that it is offering $31/share to purchase Yahoo! outright sees Microsoft doing the right thing at the right time. Why? For a number of reasons, not the least of which being that Microsoft has been planning this for quite some time. The first indication of that, of course, is that Steve Ballmer didn’t wake up this morning and decide to spend $44 billion dollars. This is an acquisition that will have to be handled very carefully, across a number of fronts, and one that has been in planning for a long time. Some early indications of the direction Microsoft was heading came last fall when Microsoft announced it planned to own 40% of search share. In looking at our chart of the last year’s search performance, with all of the major players maintaining their share but only growing slowly if at all, it was clear that a big play was in the works.
Microsoft’s acquisition at first glance is an effort to shore up search, and indeed that may be the main reason. However there are other benefits to a Microsoft acquisition of Yahoo:
- it immediately establishes Microsoft as a major player, or increases their influence, across a number of internet properties, not only search
- Maps, where Microsoft has great technology but not the reach it wants
- Photo sharing. Flickr is a great acquisition for Microsoft
- Messaging. Besides greatly expanding the reach of instant messaging, MS gets the new Yahoo Messenger technology, based on WPF.
- Personal homepage: Live.com has been languishing of late, and the Yahoo homepage is probably the next best thing about Yahoo after search
- QnA/Answers. Yahoo Answers is the leader in the space, and Windows Live QnA hasn’t taken off
- it takes a swing at Google, the day after an underperforming earnings report and before the DoubleClick acquisition goes through
- it preserves Yahoo’s structural assets before the company’s problems start tearing the assets apart
- it sets up Microsoft’s strategy going forward, at a time where it makes sense to make a course correction
The Justice Department has already expressed interest in looking at this acquisition, and the problems of amalgamating the two companies are best taken in a slow and careful way, so you won’t be seeing the full effects of this acquisition for 2-3 years, but Microsoft has been planning this move for a long time, the timing is right, and the future just got a lot better for Microsoft, for Windows Live, and for users of both Microsoft and Yahoo.
We’re going to be talking a lot about Yahoo! in the next few months and beyond. For now, here’s some links to some more on the story:
Microsoft: Press Release
Yahoo!: Press Release
Danny Sullivan, Search Engine Land: Microsoft Makes $45 Billion bid to buy Yahoo!
Todd Bishop, Seattle PI: Microsoft’s Big Yahoo! Bid: Behind the scenes details
Long Zheng, istartedsomething: Microsoft + Yahoo = Big Mess?