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The offer made by Microsoft yesterday to buy Yahoo for $31 per share is clearly only the opening shot in what could be the Internet deal of the decade. Such is the concern about Google’s dominance of the search market, Microsoft are willing to tag Yahoo at $44.6billion, a 60% hike on their market value. Sources close to the deal are reported as saying that Ballmer and his Board are willing to go further, to somewhere around the $41 per share mark, in their attempt to stifle Google’s progress.

Clearly a serious competitor to Google will be welcomed in some parts. The rapid growth and emergence as the leading search engine, handling over 50% of all USA searches, fills some with trepidation, not least because of the vast amount of data on personal search habits the company collects and their stranglehold on search advertising. However the difficulty facing Microsoft is not actually in gaining control of Yahoo but in how it would merge the two companies in such a way that it could indeed compete with their arch rivals.
The Google corporate psyche is squarely about search and advertising. Whilst it makes moves to grasp mobile search environments, their game plan is predictable and in business terms quite shallow. They lack the depth that a Microhoo! would represent and they must be acutely aware that the internet community is fickle and usage can evaporate in an instant.

Microsoft is about personal and business computing and carries a brand stigma with the younger internet users, whilst Yahoo was created for search but it positioned itself as a portal, not a search engine. Consequently Microhoo! will find it difficult to go head-to-head on pure search. In fact I think the chances of their success will actually depend on the ability of Microhoo! to recognize that it should not try to compete on search.

The focus of a merged Microsoft-Yahoo entity should be to offer the user much more than Google can. Combining the home/office/user software and system experience of Microsoft with the portal search and management skills of Yahoo, Microhoo! would have the opportunity to develop a truly information conscious environment, pulling together threads of data from any source across any media and presenting it as information on any device. This would certainly be a long haul for Microhoo! but deliverable if they get the right mix of corporate chemistry. More to come!