Is “Microhoo” A Deal Too Far?
At the peak of its success in the mid-Nineties, Microsoft came to be known as the “Evil Empire” – an aggressive, monopolistic outfit, prone to steamrolling any company that posed a competitive threat. Years later, when Google came to prominence, it adopted the slogan “do no evil” to deflect concern that it, in turn, would be corrupted by phenomenal growth.
Both those images are playing out now as the world digests Microsoft’s giant $44.6bn bid for former internet darling Yahoo! – its most blatant attempt yet to curtail Google’s relentless advance on the net.
Essentially, this bid is a public concession of failure: an admission that, despite its huge resources, Microsoft has failed to build up a presence to challenge Google, which now commands 81% of all internet searches and a whopping 60% of online advertising revenue.
But will Microsoft’s attempt to buy itself into the 21st century succeed? It has certainly rattled Google, which is going all-out to thwart the bid by lining up all manner of possible saviours for chief Yahoo Jerry Yang, as he desperately attempts to extract himself from Microsoft’s bear hug.
Google knows better than to doubt the determination of either Microsoft or its bombastic chief, Steve Ballmer, particularly since this deal would give Microsoft the critical mass to compete with Google head-on. That being the case, why was news of it greeted with such hoots of derision? Yahoo! might once have been king of the Valley but it’s been heading south for years and is now an empty bag of technology and talent.
And let’s not even talk about the clash of cultures that such a merger would create. Second and third players rarely combine successfully to defeat market leaders – and ill-advised giant mergers often mark the peak of market cycles. This could be Microsoft’s AOL / Time Warner.
But even the sniff of the mega-deal cheered the markets, particularly as it coincided with China’s strong cash move into Rio Tinto. Yet both these deals should be ringing alarm bells. China’s intervention in the metal markets is deeply nationalistic and geopolitical.
A Microsoft-Google duopoly, while more politically subtle, brings us close to a world in which corporations wield more power than governments. In both cases, massive issues of sovereignty and commercial freedom are being decided not in parliament but in boardroom negotiations. The West’s elected politicians have some serious catching up to do.