The numbers on this deal are very interesting. Like Microsoft’s acquisition of a minor stake in Facebook, most of the value created in the transaction is strategic – it has less to do with the present value of future cash flow, and more to do with making sure an asset does not fall into a competitor’s hands
There is a broad array of issues at play here:
– The No.2 + No.3 competitor joining to take on a dominant No.1 competitor
– The ‘land grab’ mentality of the current media market (a redux of the ‘eyeballs economy’ of the original dot.com bubble)
– Scale + scope economies
But leaving aside the economic + market factors, I am quite surprised no-one has noted the very (very) different cultures at the three companies.
Google is a ‘pure’ technology company – it is an engineering-led business.
Yahoo is (or was, until very recently) a media company – it is/was a media-led business.
Microsoft is a software company, with an increasing services-bent.
Viewed through this lens, it is clear why Google captured the outright lead. But a change is coming, as we all now take certain technologies for granted, which calls for a new breed of company. Yahoo! hasn’t been able to step in and fill that gap. Microsoft is certainly trying to, but it was a late convert.
Can Microsoft + Yahoo!, as a combined entity, pull it off? I think so, but it is going to require some very deft handling of cultural change. Now Bill Gates has ‘retired’, I wonder who has the wherewithal to pull it off?