The
Economist claims that the proposed marriage of Microsoft and Yahoo is more about helping Microsoft expand its "cloud" computing capabilities than it is about combining content and powerful
search and display advertising services. Make no mistake about it, the paper says--as computing moves off the desktop and into the online "cloud", the company with the most data will win the
advertising wars. That's why Microsoft wants access to Yahoo's massive user base with its suite of well-used services, like Yahoo Finance and Yahoo News.
Should the merger go through--and
many feel it will despite Yahoo's rejection of the $45 billion bid as a fair price--the combined company would suffer from "post-merger indigestion," not to mention severe regulatory scrutiny. Many of
Microsoft and Yahoo's products and services overlap; some would have to be combined, while others will need to be eliminated completely. There's also the difference in infrastructure: Yahoo has built
its business on open-source technology, while Microsoft has made its fortune through proprietary software.
In the end, Microsoft's offer is an admission that it needs Yahoo to compete with
Google. Google is farther ahead in both search and online computing services, having used its technology to build a vast wellspring of information about those who use its free services. "Most
importantly," says the
Economist report, "Google has figured out a way to make money from its cloud," in the form of targeted ad space that leverages all that user data.
Read the whole story at The Economist »