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The War for the Internet

Why Yahoo is Microsoft's best chance to "kill Google."
Industry:
Technology
Summary:
The Company provides targeted advertising and global internet search solutions as well as intranet solutions via an enterprise search appliance.
Primary executive:
Dr. Eric E. Schmidt, Ph.D.,
Industry:
Technology
Summary:
The Company is a global Intenet brand and trafficked destinations worldwide. It is focused on powering its communities of …
Primary executive:
Jerry Yang,
Industry:
Technology
Summary:
The Company develops, manufactures, licenses, and supports a range of software products for many computing devices.
Primary executive:
Steven A. Ballmer,
The internet battle lines have been drawn.

On one side will be Microsoft, Yahoo, and Facebook, which has a strategic partnership with the software giant. On the other side, Google and its Open Social protocol, which seeks to develop a common software standard to bridge together MySpace, LinkedIn, and Plaxo.

Microsoft's chief executive, Steve Ballmer, has long sought a way to counter Google's meteoric rise. For Ballmer, it's not just business. It's personal.

In 2005, after Google snared former Microsoft China guru Kai-Fu Lee to run its own China operations, Ballmer launched into an expletive-laden, chair-throwing tirade, in which he cursed Google C.E.O. Eric Schmidt.

"I'm going to fucking bury that guy, I have done it before, and I will do it again," Ballmer raged, according to court documents from a lawsuit over the dispute. "I'm going to fucking kill Google."

A tie-up with Yahoo represents Microsoft's best shot at trying to "kill Google."

In his letter to Yahoo, Ballmer wrote of his "vision that the online businesses of Microsoft and Yahoo should be aligned in some way to create a more effective competitor in the online marketplace."

One year, ago, Microsoft offered to enter a strategic partnership with Yahoo, but was rebuffed after Yahoo said it wanted time to capture the "upside" presented by the company's rollout of Panama, its much-ballyhooed advertising platform.

"A year has gone by, and the competitive situation has not improved," Ballmer wrote in his letter. "While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo that we are proposing."

But even after a merger with Yahoo, Microsoft faces an uphill climb. Google currently has 70 percent of the Web-search market, while a combined Microsoft-Yahoo would command only 30 percent.

Referring to Google, Ballmer wrote: "Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo can offer a credible alternative for consumers, advertisers, and publishers."

Reaction to the offer around the blogosphere has been largely positive, if for no other reason than most observers feel this is the only alternative for either Microsoft or Yahoo to have a shot at taking on Google.

Todd Bishop, who writes the influential Microsoft blog for the Seattle Post-Intelligencer, said, "It's a huge move that, if successful, promises to reshape the internet industry, pitting Microsoft against Google in a head-to-head competition between two online giants."

Fred Wilson, who just this week told Portfolio.com that the time is right for a Microsoft-Yahoo linkup, wrote, "We all knew this was coming. Yahoo was cheap. Too cheap. And a mess. Rats were leaving the sinking ship en masse. It was not sustainable. Something had to happen."



 
 

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