THE DEAL is about Microsoft’s unsolicited bid to buy Yahoo for $ 44.6, which has started a battle of domination over Internet. The deal, which would include cash and Microsoft stock options, values Yahoo shares at $31 a share, at a 62 per cent premium. This will change the equation of surfing the Internet by creating a stronger competitor to the Google.

 

If this deal takes off, then, Google will face stiff competition in online advertising market where it enjoys 68 per cent of market share. Moreover, Microsoft’s MSN search engine will get a new life and it will be a major setback for Google’s dominated search engine that has 76 per cent market share. So, the reaction of Google was quite obvious and expected, as it accused Microsoft of extending its personal computers (PC) monopoly to the Internet.

 

Google’s unfriendliness isn’t a surprise as, if Microsoft and Yahoo merge, the total advertisement revenue of these two companies will remain marginally lesser than that of Google. However, the enmity between Google and Microsoft is not new as in 2006, when Google complained to the Justice Department and European Commission that Microsoft was making its search engine the default on its web browser, Microsoft was forced to modify the browser so that Google and Yahoo were easily accessible as well. Again last year when Google proposed acquisition of online advertisement company ‘Doubleclick’ Microsoft claimed that the deal could give Google inordinate power to control advertisements.

           

It is also the question of survival for Jerry Yang’s Yahoo. It has already started exploring the possible options. The situation for Yahoo seems to be grim as its stock price is at a four-year low at the time of the bid and its profits have been falling since late 2006. It is also doubtful that any other suitor or competitors will be able to top Microsoft’s offer. The disclosure of the fact that Yahoo would consider a business alliance with Google is one way to rebuff the takeover proposal by Microsoft. But, this will only further enhance the enmity between Microsoft and Google.

 

There is still a long way to go, as the deal cannot be signed overnight, till Yahoo agrees and no regulator calls foul, though Microsoft is targeting the end of this year. It has to be approved first by Yahoo’s shareholders, then it will face reviews by antitrust regulators in the United States and Europe. Even if Microsoft takes over Yahoo, there will still be a competitive market in the web search business. Market leader Google alone accounted for 56.3 per cent of all web searches in December, as against 31.5 per cent for Yahoo and Microsoft combined.

 

Whatever comes out from this hullabaloo hardly matters to a common man, what matters is its impact, which will be revolutionary on the online industry.