By now, you’ve probably heard of the unsolicited offer by Microsoft to purchase Yahoo! for $44.6 billion in cash and stock. These types of acquisitions are always surprising when they happen, but let’s remember that rumors circulated about a year ago of a possible deal between the two companies. I’ll let the experts on Wall Street do the financial prognosis of the deal, but what does this mean for advertisers? Let’s take a look.

Advantages

1. Yahoo! brings a lot to the party…
1. Largest Portal
2. Search Share – they bring 18% market share
3. International Presence – with Yahoo Japan, their stake in China’s Alibaba.com and South Korea’s GMarket Inc.
4. Great Programs – Yahoo! does a great job of creating programs and executing them.
5. Web 2.0 applications with the acquisitions of jumpcut, delicious, flickr and confabulator (their widget ap)
6. Advertising Revenue – all of Yahoo’s revenue comes from advertising which helps balance Microsoft’s revenue or software and gaming.
7. Relationships – Yahoo! is incredibly adept at having relationships with major advertisers and agencies.

2. Microsoft brings a variety of solid things to this possible marriage as well…
1. Cash – they have the money to truly invest in development of Web 2.0 and additional social marketing applications, etc.
2. Software – with the majority of the world using Microsoft products, you could see integration with software applications in the future.
3. Gaming – Xbox and the game properties they own are incredibly valuable and integration with Yahoo! could be very interesting.
4. Search – something like 13% in market share, making the combined share of the two at 31%... which is still a distant second to Google.
5. aQuantive – between Atlas, Drive PM and Avenue A/Razorfish they have a very solid platform of backend tracking and front end creative/program development

What I believe neither of the two companies bring to the party right now include:

1. A Killer Social Marketing Application – yes, you can call Flickr a social marketing ap, but I’m thinking along the lines of Facebook, MySpace or Linkedin.

2. Internal Killer Innovation – they’ve both “bought” their innovation. And this strategy has been successful, but it would be interesting to see if this potential merger might spur on internal innovation.

Disadvantages

1. Integration – the devil is always in the details – from technology and platform integration to content, etc.
2. Google – they’re not going away and the combined companies will still need to figure out how to slay the dragon in the future in order to gain additional market share.

Overall, I think it’s a great deal, knowing what I know today. Advertisers could benefit from integration and I think the big winner could be gaming in this deal.

Also, big thanks to Christian Kugel from Denuo for his thoughts and perspective…

Your thoughts?

Scott

Microsoft Yahoo Google buyout merger advertising social media media Alibaba GMarket Japan South Korea Facebook MySpace Linkedin Xbox gaming aQuantive Atlas AvenueA/Razorfish Flickr

Christian Kugel Denuo HP Hewlett Packard Scott Berg