Chowrangi

New York Times reported Microsoft seriously approaching Yahoo! with a take over bid. Expected take over amount? $50 Billion.

Part of the reason for that is because Google keeps trumping Microsoft on the deal front, beating out the company on not just DoubleClick, but also for a renewed search advertising pact with AOL in 2005 that Microsoft lusted after.

Moreover, with Google developing Internet-based software that directly competes with Microsoft Office, sources said Microsoft has no choice but to go on the offensive.

As it stands now, a deal between Microsoft and Yahoo! would up the combined companies’ share of the all-important search advertising market to 27 percent against Google’s 65 percent. It would also narrow the gap in overall online ads with Google to just 13 percent.

More importantly, a deal would create what one source described as “the dominant force on the Internet” in terms of eyeballs. That’s an important consideration as more and more content flows online - as the equations goes, eyeballs equal advertising.

Microsoft and Yahoo! also feature complimentary offerings on the content side, with MSN drawing an older audience with its news focus. By contrast, Yahoo! attracts a younger demographic with its entertainment coverage.

Aside from cost savings, a deal would also create opportunities to use Yahoo! content on Microsoft devices, such as making music exclusively provided to Yahoo! Music available on Microsoft’s Xbox game console and Zune music player.

It may be a rumour, as WSJ is suggesting. But I personally feel Microsoft is sharping its claws for a final confrontation with Google. Going for an acquisition of such a massive size is clearly a gamble which Microsoft may survive and grow exponentially to new horizons or it may go down with the weight.

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