Will Yahoo Help Microsoft Slay the Google Monster?

Microsoft is hoping that its acquisition of Yahoo will help it gain ground on the advertising and search front, and adding Yahoo's 500 million users to its base. But assuming that Jerry Yang and Co. yield to the Redmond giant, will it be enough?

The New York Times recently ran a picture depicting the Microsoft and Google as two large sharks consuming everything in their path: aQuantive, DoubleClick, and MultiMap. Then there are the smaller exclusivity agreements with prominent tech companies such as The Wall Street Journal and Facebook for Microsoft, and Google's deals with MySpace, Fox, and well, just about everyone else. (Source: nytimes.com)

According to The Wall Street Journal, a Yahoo and Microsoft merge would comprise less than 16% of the total search market. Compared with Google's staggering 62.4% market share, the merger would, to use the New York Times' fish analogy, seem to make two search company minnows into little more than a goldfish.

Of course, if you compare hard numbers in online revenue the gap closes. Google claimed $4.8 billion last quarter, while Yahoo and Microsoft had a combined total of $2.6 billion.

That being said, Google is not particularly comfortable with its position. On February 3, the search giant responded to Microsoft's bid. In a statement, the company raised fears that Microsoft's take over could help it dominate the Internet by potentially shutting out its competitors with software restrictions: "This is about more than simply a financial transaction...It's about preserving the underlying principles of the Internet: openness and innovation...could a combination of [Microsoft and Yahoo] take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors' email, IM, and web-based services?"

While the above argument has some merit to it, Google's recent acquisition of DoubleClick could send the company skyrocketing towards owning 80% of third-party online advertising. So much for openness and innovation. (Source: marketwatch.com)

If Yahoo falls, as many experts expect it will, two giants (or perhaps one giant) will remain to duke it out over advertising. Yusuf Mehdi, Microsoft's senior vice president for strategic partnership recent told the New York Times, "people are rooting for a credible No. 2." (Source: nytimes.com)

Microsoft, it seems, is merely trying to hang on in a fight it may have surrendered a long time ago.