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Many industry experts, journalists, and bloggers have expressed their displeasure with Microsoft’s possible takeover of Yahoo!. Though the executives at Yahoo! have so far rejected the $41.7 billion offer, many expect a deal will be reached at a higher price, much to the dismay of the lion’s share of writers on the subject. As Jerry Yang, Yahoo!’s CEO, fends off the strong arm tactics of Steve Ballmer at Microsoft, we find ourselves rooting for him without knowing exactly why. Is it because we like the underdog? Or just because we hate Microsoft? Is there anything positive that could come out of this deal for consumers?

Yahoo! has been spiraling downward for quite awhile, and they haven’t been able to compete with search engine giant Google. Google has inked deal after deal with rival companies, perhaps the most important being the acquisition of DoubleClick, an internet advertising broker, which gives Google even more control over how ads reach internet users. The DoubleClick deal was cleared by the FCC after months of hearings, but is still awaiting approval by European courts. Yahoo! has lost ground to Google consistently when it comes to search technology and advertising, though Microsoft’s offer clearly intends to buck this trend.

Almost every news source covering the deal mentions that Microsoft wants a piece of the internet advertising industry. Perhaps together Yahoo! and Microsoft can present a viable alternative to Google for both search users and advertisers. The key to developing solid, targeted ad technology is collecting user behavior data, which is one thing at which Yahoo! has always excelled. As the Seattle Times reports, “Yahoo assembles a profile of a person’s behavior based on searches within Yahoo, videos watched, ads clicked and visits to Yahoo sites and partner sites such as eBay. The profile that emerges could have details such as a person’s basic salary, health concerns, cars, number of children, gender, age, ZIP code, industry and work.” Yahoo! is able to collect these detailed profiles in a way that Microsoft is not, and the information could lead to a vast improvement in Microsoft’s presence and success online.

Aside from the expected boost in Microsoft’s online ad chops, industry experts are speculating about the company’s possible plans to expand online software efforts. As the Wall Street Journal reported last week, “the company’s products face pressure to evolve as the rise of online services changes how people use technology.” Microsoft is being outmatched by the Software As A Service (SAAS) industry right now, and they rely almost exclusively on traditional software licensing for their revenue. Their competition comes from SAAS vendors who provide value to business users by hosting applications on proprietary servers, freeing businesses from expensive data centers and draconian licensing fees.

The Yahoo! deal could help Microsoft transition into the online software arena. As British insurance company Aviva PLC told the Wall Street Journal, “[the company] hopes Microsoft will combine Yahoo’s online software and knowledge of how the Internet works with Microsoft’s understanding of how a business operates to develop innovative corporate software.” If the deal goes through, Microsoft should be making plans to harness not only Yahoo!’s potential for ad revenue but also their expertise in web applications.

This dual strategy would push them towards the ultimate goal of competing with Google, which has an early lead in providing office tools through web applications. Google Apps, which includes word processor, spreadsheet, and presentation programs is becoming more and more popular with businesses of all sizes. Microsoft has made some moves to allow online access to its Office Suite, and perhaps with help from Yahoo!’s experts they will bring their software to the next generation of delivery.

Speculation is still all over the board, and it will likely be quite awhile until a deal is reached. One has to wonder, due to the recent fine imposed by the EU against Microsoft for a record $1.4 billion, if a merger of the two will be approved by government anti-trust groups. While I definitely sympathize with the folks at Yahoo! and hope against hope that they will be able to fight off the acquisition, there just might be some benefits for users in the long run. Most of us are stuck with Microsoft our software provider whether we like it or not, and a deal with Yahoo! just may give them the innovative approach they need to please us.

Wednesday, February 27th, 2008 You can skip to the end and leave a response. Pinging is currently not allowed.

By Haley January Eckels