Microsoft has not really been a front runner in industries that its involved in. Microsoft loves to play catch up, and that is what it has done for the past few years in the gaming industry, the search industry, and a few others. So we can be sure that Microsoft will not come up with a revolutionary search technology that would upstage Google. It’s not as if Microsoft has been gaining a lot of ground on the top two anyway, so the most logical thing for Microsoft will be to wait for Yahoo! to stumble again and come back to the table with another offer.

For Yahoo! it’s pretty much the last chance right now. Jerry Yang can’t fail in his mission to bring value to Yahoo! shareholders or he will be forced out. Yahoo! shareholders are very nervous these days, and who knows if they can resist another offer buy Microsoft (not that they did the first time).

For Microsoft, this shows a high degree of desperation to compete with the almighty Google in the search market. Google has singlehandedly dominated both Yahoo! and Microsoft over the past years, and there doesn’t seem to be any indication that will change, regardless of Microsoft-Yahoo deal. At the same time, Microsoft can not lose this opportunity to mount a meaningful challenge against Google. Steve Ballmer has claimed numerous times that he could do without Yahoo! if Microsoft’s offer for Yahoo is rejected, but deep down he knows that without Yahoo! Microsoft will have a very small chance of challenging Google. But here is the catch. Even with Yahoo!, Microsoft will not be able to kill off Google. Besides, one has to think about the challenges that this acquisition will cause for Microsoft (e.g. integration, employee retention, clash of cultures).

For what it’s worth, it’s more intriguing to see Yahoo and Microsoft combine forces against Google. It will probably push Google to be even better than they are today. But with only two major entities going at each other, we are left with almost a duopoly. More competition always help, so it’s a shame to see the likes of Ask! throw in the towel.

I know a lot of people have been moaning and complaining about Microsoft killing off Yahoo! and making the search world worse for it. I personally don’t agree with all the speculations. But if you are a Yahoo! executive, this Microsoft thing is the best thing that is going for you right now. Since Microsoft announced that they were willing to buy Yahoo! for $31 per share, Yahoo! has experienced a surge in its share price. Of course, if you think about the fact that Yahoo! is nowhere near challenging Google in the search market, and the future looks not so rosy for the company, having this surge has definitely brought some hope to investors who want to sell their Yahoo! shares with a smaller amount of loss.

I do believe that Yahoo! is better off selling to Microsoft before it’s too late, but I wonder if they will ask for more money now that their stock price has gone up. I guess we will have to wait and see, won’t we?

I am sure you all have heard of this new development that is Microsoft trying to buy Yahoo! in order to effectively challenge the big dog Google in the search and online advertising market. Many industry experts have come out to explain why they believe Yahoo! + Microsoft will be challenging Google in the upcoming years. I completely disagree with this. I actually believe this is not such a good move at all. Not for Yahoo! anyway:

• Yahoo! and Microsoft have relatively different corporate cultures. It would be especially hard for Microsoft to dictate its culture over Yahoo! employees without turning a few off them off. I would expect a fairly high turn over ratio once Microsoft acquires Yahoo! This is all better news for Google. Google doesn’t need to acquire Yahoo! really. They are better off acquiring the brains that made Yahoo! successful, and you can bet that they will try to woo the Yahoo! crowd from Microsoft.
• One would wonder what synergies Microsoft is after by combining these two giant entities. Is Yahoo + Microsoft really less than [YahooMicrosoft]? We shall see, but unless we are talking about scale, I can’t see any other reason why Microsoft would go after Yahoo! I know, Microsoft will become the clear No. 2 guy in the search market, but I guess one should wonder what Yahoo! has to offer to make Microsoft a legit contender for that No. 1 spot.
• Microsoft will probably kill Yahoo! by acquiring the company as the two have somewhat incompatible culture and business philosophies. At the same time, we will be left with an industry that is basically a duopoly now, and we can expect less competition in this industry which will be bad for the users. Let’s hope someone else rises up to challenge Microsoft or Google.

Whatever happens, Google will still protect its lead in the online advertising and search market. I do expect Microsoft to push Google hard, but it is interesting to see how Microsoft approaches their new role as underdogs in this market. Google is the clear front-runner, and Microsoft has shown in the past that it is clearly not a good front-runner, so maybe Microsoft is better off being No. 2. In the meantime, I believe Yahoo! should really accept this generous offer by Microsoft. Yahoo! has been a great company, and it’s one of those brands that we will remember for a long time to come. At the same time, Yahoo! management has shown that it has run out of ideas on how to effectively challenge Google, and maybe it is time to move on. Whatever happens, the second half of 2008 just got more exciting!