Would a Microsoft-Yahoo deal out Google Google?

Computerworld - As Microsoft Corp. tries to take on search company Google Inc. for more advertising revenue by offering to acquire Yahoo Inc., a big question remains: Can Microsoft and Yahoo together best Google?

"That's the key question," said Allan Krans, an analyst at Technology Business Research Inc. in Hampton, N.H. "I think it puts them in a better position to gain ground on Google, but I think it's far from any guaranteed results."

Microsoft today announced an unsolicited $44.6 billion cash and stock offer to buy Yahoo to create an alternative to the Google juggernaut. Yahoo said it's reviewing the offer and will respond later.

Several analysts interviewed today said the deal has more than its share of benefits and pitfalls for both companies. If Microsoft succeeds in acquiring Yahoo, then the two companies' next step should be to "lay out a strategy to drive search," Krans said. "The ultimate goal is to drive online advertising revenue, but to get there you have to have tools and the platform. But then what advertisers really want to see is people clicking on your site."

Herein lies the problem for both Microsoft and Yahoo: More Internet users go to Google for their online searches than either Microsoft's or Yahoo's Web sites. "They haven't been successful at capturing more of that online traffic. They're going to have to turn that around. They're also going to have to attract more advertisers," Krans said.

A benefit of such a deal, however, is that instead of continuing to compete with each other while attempting to catch up with Google, Microsoft and Yahoo could combine their best features and try to gain ground on Google as one, Krans said. "Microsoft is trying to drive the popularity of its Windows and Office tools through their online offerings, while Yahoo has popular e-mail services and strength in its [online user] groups. Once people sign up and participate in those groups, it tends to be a very sticky thing. People don't jump around."

Could such an acquisition help Microsoft catch Google?

"I think it's going to take a long time," Krans said. "At this point, both companies would like to stop the erosion of their market shares and retain their bases because it just keeps flowing over to Google. Either way, it's going to be a long-term strategy. Google has over a 60% share of search in the United States. It will take a while to change that."

Even if it acquires Yahoo, Microsoft has no way of knowing if it can get users to leave Google and do their searches with Microsoft-Yahoo, he said.