May 23, 2008, 10:45 AM — For years, I've felt that Microsoft was always a small Chihuahua biting at the heels of Google. Sure, the company may be huge and it owns the software market, but it's a mere wannabe in the online space. And then, as Microsoft started making inroads with Yahoo, I wondered if its status as the also-ran in the industry would change. It didn't. But in an ironic twist of fate, it might after all.
In case you haven't been following the Microsoft-Yahoo debacle, the former walked away from the retreating Yahoo after being forced to see time and again that it was truly despised by Jerry Yang and company. And after being told that the Yahoo asking price was ridiculously high and wouldn't come down, Ballmer made the (correct) decision to walk away and fight another day.
When that happened, many of us thought any chance of a deal between the two companies was practically nil and the opportunity for Microsoft to walk away with something worthwhile was slim. Google was happy too - it never wanted the deal to happen for fear of losing its significant lead over the competition.
But in the past week or so, rumors have been swirling about the possibility of Microsoft and Yahoo working together on a deal that wouldn't mean a full acquisition, but would see Ballmer and company acquire Yahoo's entire search product and become a major force in that business.
Some say it won't matter because the combined efforts of both Yahoo and Microsoft's search products can't compare to Google's own product, but I'm not so sure we should write off this deal so quickly. In fact, I think Google should be even more concerned about this one than the original plan.
Let's face it - the original deal between Microsoft and Yahoo made little sense. Why would Microsoft want to pay all that cash for a company that would only offer improved technology and a jump in traffic of no more than 27 percent? The combined firm would be such a bloated mess, I'm not sure it could even match Google a year later.
But the crown jewel of that deal was search. Regardless of the fact that Google commands the US market, Yahoo commands search markets all over the world and would provide Microsoft the immediate growth in users that it has been hoping for all along. And with the help of some smart business decisions, the company may actually be able to match Google dollar-for-dollar in the advertising game.
Microsoft has something that Yahoo - Google's original main competitor - doesn't: huge coffers of cash just waiting to be dumped into the online business to try to beat Google at its own game. And with the help of a far more popular search service, there's no reason to suggest that Microsoft won't use that cash to develop better algorithms, create unique offerings, and do everything it can to confront (and possibly beat) Google.
Some may say that Microsoft isn't a major player in the online business, but when you look at the facts, I doubt too many would agree. Microsoft has more than enough cash to stand toe-to-toe with Google and has the desire it needs to do just that. And with some help from Yahoo and its search, there's no reason to suggest that the trinity Microsoft has needed is just around the corner.
Google should be scared. Very, very scared.
