Friday, October 14, 2005

Yahoo! and MSN the new alliance?

Yahoo! and MSN have created a partnership on instant messaging so the two former competitors' products will be able to communicate with each other. This means two things. First of all it is a recognition of AOL's clear leadership on this product in USA. The other very interesting fact is that it recognizes the strength that Google has gained - not in messaging - but generally. It is interesting to see two such big players make an alliance against AOL that just doesn't include small time messenger client Gtalk from Google. Google could easily have been part of this alliance against the AOL messenger, but they are not! It seems that Yahoo! and Microsoft really are acknowledging the Google threat.

From comments the 24th of September:

I agree Google seems to be making the right moves and everyone else is doing catch-up. Is a merge between MS and Yahoo possible? They would have a better chance of slowing the growth of Google then by working separately. My enemy's enemy is my friend?

My answer:
I don't think that a merge between MSFT and Yahoo! is likely, although you are making some very valid points! MSFT has been offering to buy Yahoo! since they were much smaller, but Yahoo! has always been wanting to do it on their own. I guess partly because they also have the chance of beating MSFT and then partly because MSFT has become a slow growth business, while Yahoo! still is growing 57% a year on EBITDA (Earnings Before Income Tax Depreciation and Amortization). Yahoo! shareholders would loose out on this growth, if they were to become part of MSFT. So I don't think, that Yahoo! shareholders would like it - even though MSFT most likely would.

I guess the anonymous reader was a bit more foreseeing than I! Its really interesting! Two main competitors are joining up. Not totally on all products, a merger or anything like that, but just the fact that they are cooperating is interesting. They use to be head on and still are on many areas. But along came Google and surpassed Yahoo! as the online wonder child with capabilities to rewrite the tech industry rules. So now Yahoo! and Microsoft are starting to cooperate. Question is how far they will go? Maybe Google will become so strong that they will eventually get a lot closer - basically because they have to?

Google will have the capability to distribute online software currently from Sun. Microsoft will need to continue to distribute software be it offline or online. Most likely they will also need to distribute software online, and here Yahoo! could be a formidable partner in the competition against Google. An interesting new direction in this game!

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