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What Microsoft and Yahoo! Must Now Do To Compete with Google

Microsoft Yahoo Merger 2010

Lookout, Google – there’s a new internet company in town, and it’s looking to take over. Well, it may not be new, but the merger between software giant Microsoft and internet search engine Yahoo! will create a new online force for search engine dominance.

The merger was announced by Microsoft and Yahoo! as a result of a $44.6 billion buyout. Though Yahoo! will become a subsidiary of Microsoft, it will still keep around 88% of its earnings.

More Earnings will be Enjoyed!

Thanks to the software and technology provided by Microsoft, Yahoo! will save considerable money on capital expenditures of technology development. Yahoo! expects to increase yearly earnings by about $275 million thanks to the merger.

Though the future internet search strategies are still being developed and not yet announced by Microsoft and Yahoo!, as of the merger they will own about 28% of the search engine market share in the U.S. Still, compare that to the current market share of 65% owned by Google and you can see that Yahoo!/Microsoft has a long way to go and a lot of catching up to do.

What is interesting about Yahoo!’s decision to accept Microsoft’s offer is that back in the year 2000 it had a solid market share of the internet search industry. Back then they decided to buy search engine results from a newer search engine company, Google, to be shown on Yahoo!’s results pages. But Yahoo! users found that they preferred Google and started using its search engine separately. The rest, as they say, is history.

What the Merger Will Accomplish

The Yahoo! merger with Microsoft will provide a wider scope of search engine products and designs. Pay per click advertising will increase for the two companies since they will no longer be in competition with each other. Business marketers will now be able to buy PPC advertising and have their ads show up on both MSN and Yahoo! search results pages.

Microsoft has always touted their software engineers to be the top in the field, and that includes web development engineers. Curiously it has struggled to keep up with Google and their advanced internet search algorithm technology. Now Microsoft has the tools it needs with the addition of Yahoo! to really start focusing on competing with Google. Microsoft has plenty of cash capital to invest in search technology, and though the company makes a mountain of money each year on its Office and OS products, the future growth of Microsoft will depend on its ability to capture internet market share.

Microsoft and Yahoo! still have a long stretch of road ahead before they can compete effectively with Google. One of the reasons Google is so popular around the world is its simplicity. Microsoft and Yahoo! will have to find new ways to compete with Google’s simplistic interface and approach and still match Google’s superior technology. In a few years, we should see some very interesting competitive moves from both sides.

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