Who’s afraid of Micro-hoo?

Microsoft’s Steve Ballmer certainly thinks that “this combination enables synergies related to scale economics of the advertising platform where today there is only one competitor”, and “reduce operational inefficiencies” as they throw their respective weights together to gun for Google. As far as Microsoft’s concerned, the move makes perfect sense. It fits in with the strategy of muscling into markets it cannot claim with in-house innovation (it’s been famously slapped on the wrist for its anti-competitive practices), by simply buying up. Acquiring Yahoo would give it a large, loyal user-base as well as (it hopes) give it clout in the online advertising market, where all the money is.

So far, Google has effortlessly ruled this space. Recently, Microsoft and Google sparred over the online advertising company DoubleClick, with Microsoft laughably opposing it on antitrust grounds, claiming that it would choke all competition. But the fact remains that Google has figured out the best way to monetise search, with contextual and targeted advertisements that offer the best value for money. And it’s a virtuous cycle of success as ad-spends flock to the established market leader. This 40 billion-dollar worth online advertising industry is expected to double in the next five years and Microsoft and Yahoo both desperately want in.

What’s worse, Microsoft’s real monopoly now, its Office suite, is also under siege from Google Docs and other online productivity apps. In fact, Microsoft’s entire licence-based desktop software model is sorely undermined because now these products can be substituted with free collaborative online versions. As more and more of the world’s work will be done on the Web, on servers rather than personal computers, Microsoft risks getting left behind.

While Microsoft Live, its own umbrella of Internet ventures is a clear failure, Yahoo has managed to keep pace with some part of this online invasion. Flickr, its photo-sharing site, and Del.ici.ous, its social bookmarking venture, and even Yahoo Answers are all success stories.

Ironically enough, Google, once the scrappy little search engine with a comical name, now finds itself fighting the old Microsoft image of controlling colossus. Even though Search Engine Watch pegs Google’s share at about 57 per cent and Microsoft and Yahoo together make up about 34 per cent, this doesn’t mean much given that Yahoo piggybacked on Google technology until as recently as 2004. And at this point, even if they do the math and come up with a superior algorithm, it will be hard to undo the Google monoculture of our minds. It’s not a hold we resent, because it doesn’t cost us anything to make the switch to another search engine. And so by force of habit, for most of the world Google remains the front door to the Web.

But search and associated advertising is not the only game in town. Google, with its own imperial ambitions, has moved into a range of other applications, from email, photo, video and blogs, social networking and VoIP, online maps and libraries, and lots more. One world under Google is becoming an all-too-likely situation. If Microsoft and Yahoo manage to mesh their respective areas of expertise and tackle Google on these emerging frontiers, then that scenario looks less likely.

Though who knows, just the way Google got here and made short work of the MSN-Yahoo grand portals, maybe some other garage-venture with the next bright idea is biding its time to tilt the field. Despite all the speculation, the Web’s next phase is still unclear, and new ways to mine it remain undiscovered. Google’s top dog status may not last forever, but there’s nothing to say that the challenger will come from the Web’s ancien regime.

amulya.gopalakrishnanexpressindia.com