Hand it to the Internet. It has proven itself to be the ?cloud? analysts had forecast?of no fixed shape or structure. And it is still an idiosyncratic entrant to the global M&A arena, never too sure if it really wants to be there at all, talking of ?synergies? the way executives discuss regular business alliances. Perhaps it?s a fierce sense of independence, or even an indifference to the lure of big bucks. Whatever it is, Internet surfers are much less surprised than offline observers by Yahoo!?s rejection of Microsoft?s $44.6-billion bid for it. It?s a huge offer. It values the Internet company at a 62% premium to its pre-bid market cap. Already under strain from the big bang cloud expansion that the Google phenomenon is turning out to be, many analysts reckon that Yahoo!?s best hope is a merger with Microsoft. The combine would at least have more US surfer traffic than Google, and if the latter is not challenged now, it may be too late for either of them to stall its probable dominance. For years, Microsoft had the ?first screen? advantage with nearly all computers, its Windows software playing the monopoly man-machine interface. Google now has the ?essential info tool? advantage, with its search engine a near-monopoly in information retrieval from the Net. What?s more, it is fast becoming the wet dream for marketers keen on shooting off advertisements as relevance-seeking missives.
With its search market lead and clear revenue attraction logic, Google is increasingly seen as the business that could displace Microsoft as the defining company of the electronic age. But is a Microsoft-Yahoo! merger the appropriate response? Technically speaking, there is much for the former to gain from the latter, especially in Net-related capabilities. But then, this is a game of strategy as much as skill (or money). Google?s brilliance lies, essentially, in the algorithms that allow it to map cyberspace so darned effectively on the simple customer insight that anyone searching for stuff online would want to follow the most heavily surfed trails. An effective challenge, perhaps, ought to take Google?s weaknesses as its cues. For one, more and more people feel spooked by the thought of a company tracking their search behaviour. For another, as academic researchers will tell you, there may be safety in numbers, but not necessarily value.
