The $45 Billion Question

Should Microsoft and Yahoo be allowed to join forces against Google?

Microsoft has a virtual desktop monopoly, and Yahoo is a heavy hitter on the media side of the net. Yahoo's flikr and Microsoft's ever-evolving .Net framework are examples of why these two companies could dominate the web, right?

Not really.

Microsoft and Yahoo combined have less than 20% of the world-wide search market vs. more than 60% for Google. It's true that they also have the market share for online applications like instant messengers and web mail services, but these aren't as valuable as one would think in terms of revenue - The real money is in advertising on the web.

Microsoft just can't seem to get can't seem to get a foothold against Google on the web lately. For example, Windows Live Mail feels slow and clunky compared to Google's gmail, and Live Search is falling behind Google maps despite having 15 years of experience in GIS to lean on.

Since Google's offers are web based, users aren't locked-in. On the flip-side, this means that Redmond can't use it's desktop monopoly to help fight back. Even owning the biggest chunk of the browser market hasn't been able to force users away from Google's online applications. Even if it could, IE is starting to loose a lot of ground to Firefox.

I don't want to sound anti-Microsoft. Until now, I've made my living mostly programming C# with SQL Server in the back-end. I just want to make clear how much Microsoft needs some help against Google.

Besides that, Yahoo is an attractive target. Yahoo has recently laid off 1000 employees and it's stock hit a 4-year low. They also have room for 3500 employees in some new offices in Bellvue Washington, right in Microsoft's turf.

Also, consolidation is happening across all facets of the IT market; Just look at Oracle's recent takeover of BEA and Motorola's proposed merge with Nortel.

On the other hand, Microsoft has never spent anywhere near this much on an acquisition before, so Yahoo may be hard to swallow. The cultures are different, and Google would love to absorb some of the people that would leave as a result of not feeling like they fit in to the new company.

However, in my humble opinion, this battle is really about advertising revenue. Microsoft and Yahoo should be allowed to join and hope for the best. In this area, even working together they'll be the underdog against Google.