Microsoft (MSFT) CEO Steve Ballmer warns Yahoo (YHOO) not to “dis” him. Ballmer threatened to buy Yahoo for less, via a hostile takeover in the open market. News Corp. (NWS) tells Ballmer they are ready to help. Google (GOOG) steps in to comfort Yahoo, saying that a Microsoft dominated world would be evil.
AOL (TWX) certainly does not want to promote evil, so they are teaming up with Google and Yahoo. I don’t think anyone believes that a full-fledged Google/Yahoo merger would pass the regulatory muster. But a strong alliance could be good business. Yahoo is the number one portal in the U.S., and Google is by far the leader in search technology and ad revenue. AOL, through their parent Time Warner, has access to some of the best magazine content. Google already provides search advertising to AOL and holds 5% stake.
Yahoo still leads Google in display advertising and Google Finance failed to displace Yahoo Finance. Google is stronger in video and blogging. There are a lot of synergies. It does not make sense for Yahoo and Google to copy each other in every venue.
Yahoo’s real asset is its content alliances. That’s what makes Yahoo Finance such a prize. Not being a sports or movie fanatic, I don’t know if those sections of Yahoo are of equal quality. Microsoft tried to go the route of purchasing content providers with little to show for it.
Value is created differently in these companies. Microsoft’s online business is lost and will not add value to any partner. News Corp. might be trying to enhance its value by becoming a Yahoo content provider. Google creates value through technology improvements; most ventures outside of search have shown little value creation. The only true value creation occurs when Time Warner’s content is merged with Yahoo’s huge audience.
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