Why you should care if Microsoft buys Yahoo?

Anyone not living under a rock knows that Microsoft is trying to buy Yahoo!, but so what?  What difference could it possibly make to an end-user or a software developer whether Yahoo! remains independent or not?

Clearly, this is a buyout of historic proportions.  The size alone is impressive: at $45B, this is a serious chunk of change and a sizable improvement over the market valuation of Yahoo! prior to Microsoft’s offer.  But this buyout isn’t notable just for size.  This is a pivotal moment in the growth and maturation of the net: a marquis player is quite possibly going to cease to exist independently, and another is at a “make or break” moment.  As far as brands go, this is an impact on the order of seeing Netscape fade away or AOL get gobbled up by Time Warner. Like AOL, it’s quite conceivable that the brand will live on for a long time, but it’s clear that it’ll never again live with the vigor that it’s had in the past.

So just like that, Microsoft is set to gobble up Yahoo!, and the giant from Redmond marches inexorably onward, right?  Not so fast.  Remember how that AOL / Time-Warner deal worked out?  Other industries have shown us the dangers of mega-mergers, as well – Sprint / Nextel has been in the news a lot lately as Sprint slowly continues its death spiral.  Most analyses of Sprint’s current woes begin with theNextel takeover and end with gigantic accounting charges to reflect this failure and a mass exodus of (mainly ex-Nextel ) subscribers.  These failures can’t be overlooked; Microsoft could catch a world-class case of indigestion if they’re not careful.

So why is Microsoft doing this?  Nobody’s holding a gun to Ballmer’s head, right?  Or are they?  Conventional wisdom holds that Microsoft is making this move strictly out of fear of Google.  Microsoft is trying to buy search traffic (and the associated advertising revenue) because they haven’t been able to capture that market share directly.  There’s more to it than this, of course, and I’ll go into a little more depth in a future post.

In the mean time, keep watching the developments in this buyout, because win or lose, this battle is going to change the face of software.

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