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Google Lends Itself a Helping Hand

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If the long-shot duo of the once-dominant is able to create a superior product offering, it may find a way to supplant Google.

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After a weekend when underdogs ruled, Google (GOOG) reinforced its status of playground bully by reaching out to Yahoo! (YHOO) to help fend off Microsoft's (MSFT) hostile takeover bid.

In an attempt to spoil the proposed merger, Google CEO Eric Schmidt placed a call to Yahoo CEO Jerry Yang offering assistance in warding off its persistent suitor. On the official Google blog Google SVP David Drummond questioned whether Microsoft would use its takeover of Yahoo! as an opportunity to "exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC."

Microsoft responded by saying that "[t]he combination of Microsoft and Yahoo will create a more competitive marketplace by establishing a compelling No. 2 competitor for Internet search and online advertising" and that "the alternative scenarios only lead to less competition on the Internet."

Conventional wisdom seems to have already weighed in on the result of the merger, not yet consummated and announced less than 72 hours ago. Google clearly dominates the world of online search, and as we noted Friday, a combined Microsoft-Yahoo would barely capture half Google's share of U.S. searches and make a much smaller dent in Google's dominance abroad. Analysts do not expect this dynamic to change in the near future, as most users prefer Google's search for the simple reason that it is far superior to anything else available.

Also being questioned is the extent to which Microsoft-Yahoo! can challenge Google's dominance in online advertising. Google's ad service, like its search, is currently the market leader and not likely to be supplanted any time soon.

Finally, in the near term the biggest challenges for a merger between Microsoft and Yahoo! may be legal battles and the corporate culture integration process. The Senate Judiciary Committee will meet February 8th to discuss the proposed takeover, and many wonder how Microsoft's stuffy corporate image will mix with Yahoo!'s casual and (once) innovative culture.

In the end, if the long-shot duo of the once-dominant is able to create a superior product offering, it may find a way to supplant Google. But as it tends to be, time will be the arbiter of that outcome, as in Google's own words, "[u]sers benefit from constant innovation. It's what makes the Internet such an exciting place.


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