Microsoft has recently proposed a takeover bid for Yahoo. This proposal emerged due to the notion that neither company can single-handedly overcome the internet search engine behemoth Google. Microsoft announced that it will pay $44.6 billion ($31 per share) for Yahoo. This offer represents a premium of 62% compared to Yahoo’s closing share price in January 31. The merger would combine the world’s biggets software manufacturer with the owner of the most widely-used internet portal. This will result to a toe-to-toe market share battle with Google in a market for online advertising. The online advertising market is anticipating a $80 billion in revenues by 2010 (Holahan, 2008).
Google seldom mentioned at a conference call on February 1 which discussed the deal and showed the 800-pound motivation for Microsoft’s overture. Microsoft CEO Steven Ballmer has constantly reiterated that the online advertising market is progressing and the leader is always at the forefront of its growth. Both Yahoo CEO Jerry Yang and Microsoft’s Steven Ballmer share the same vision for online advertising and internet services which brought the merger into fruition early this year. Both of them believe that for both companies to increase annual revenues and scale, the two industry giants are to work together in synergy (Holahan, 2008).
A number of online publishers are adamant and wants a capable rival for Google. This acquisition is boosted by this notion of cyberspace competition. Microsoft declared that it would enable to reduce costs by $1 billion on an annual basis through this merger. It expects to see earnings per share of break-even or better by the latter half of 2008. Microsoft executives mentioned little regarding mass retrenchments that will be imminent once the merger is made formal. The new management teams would comprise of key personnel from both companies. This merger was speculated as early as late 2006 and early 2007, Microsoft and Yahoo discussed ways to work together, which involved a possible merger which eventually came into fruition this year (Holahan, 2008).
This particular article is relatively important to the course at hand because it sets a perfect example of the rules of engagement. In order for both companies to expand its marketing endeavors, both of them successfully negotiated a merger that would complement each other. This particular matter entails an aspect of marketing called relationship marketing. Relationship marketing was made to address a direct feedback for marketing campaigns. It focuses on massive customer retention, as well as long-term satisfaction. The very reason why Yahoo opted to merge with Microsoft in order to compete with rival search engine Google. With relationship marketing, accuracy of communication and overall relevancy to client remains higher compared to other areas of marketing. It leads to generating new leads in order to gain clients, as well as draw loyal customers from other companies. Relationship marketing is imminent in this merger between Yahoo and Microsoft.
Microsoft CEO Steven Ballmer declared that “The market continues to grow and the leader continues to consolidate position and there is no better way to increase scale and capacity than this acquisition.” I agree with this proposition by Microsoft due to the fact that the merger will benefit both companies and complement each other’s strengths. Ballmer disgressed that the market of online advertising and internet services has become saturated and needs a massive upheaval for clients who wants a change of scenery in terms of innovative online advertising which will be addressed by the merger of both companies. Another point which I agree with is about the potential upside of various efforts to improve its performance, including an effort to wring more profit from online advertising. Ballmer declared that “A year has gone by, and the competitive situation has not improved.” With this in mind, the Microsoft-Yahoo merger will bring a massive upheaval with the division of market share in the field of internet services. Microsoft and Yahoo is anticipating an increase in its revenues and clients within this year.
According to Microsoft, it sees the deal as giving it the engineering power to fuel innovations on the web. Both Microsoft and Yahoo have been criticized as innovation-stagnant compared to Google, which continually releases new products, and boasts of giving technical employees one day a week to work on new ideas. This suggests that the Microsoft-Yahoo merger will have an abrupt and favorable impact for both companies. I totally disagree with this statement because the merger only weeks-old and internet pundits are still skeptic on how this merger will have an impact in the internet market. Microsoft expects to see earnings per share of break-even or better by the second half of 2008. The anticipation of increased revenues remains to be seen. The merger will also urge Google to devise a counter action plan which will bring the merger’s possible liabilities.
1.What is Google’s feedback regarding this merger?
2.Does Google also intend to merge with a software company like Apple?
3.What would be the expectations of Yahoo and Microsoft from this merger in terms of creative and technological areas?
The recent Yahoo-Microsoft merger will have an impact in the field of marketing specially with online advertising and viral marketing as well. This merger will urge other companies that seeks to broaden their marketing promotions and affairs. Online marketing is an efficient tool in drawing consumers for companies to increase their revenue, as well as their market share. The merger will have an effect in the market shares of both companies that will have a series of marketing patterns for other companies to emulate. Google will ponder if it wants to broaden its horizons if ever a merger with Apple is possible as well. A software company and an online services provider will be a perfect fit for any marketing strategy at hand. Both companies will complement each other’s marketing endeavors. If this merger would prove to be successful, no doubt that other players in the market of online advertising and internet services will follow.