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Is the proposed Microsoft takeover of Yahoo bad for the internet? Many people close to the story are pointing out the many monopolistic practices and other illegal anti-competitive tactics Microsoft has employed in the past as a reason the deal should not to go through.
Google: Microsoft Deal Bad for Internet: Financial News - Yahoo! Finance (broken link)
Could a powerhouse meger betwen Microsoft and Yahoo really damage the internet?
After a quick review I would immediately side with Google, because it has been proven, that the lack of competitive forces leads to productivity losses, lags in innovation, and a slowing of technological advances, oh and there is always price hikes. Yahoo is clearly looked at as one of the big seven internet properties along with Google, Microsoft, AOL/Time Warner, IAC Interactive, and Amazon.
If Yahoo is taken out of the picture you're left with Microsoft, Google, IAC, and AOL/Time warner competing in the search market (and a handful other smaller companies). This would be very bad for consumers and business (mainly advertisers in the long run). What if Google decided to make an offer for IAC in an effort to counter the Yahoo takeover. We could potentially end up in an "internet arms race" with each of these very cash rich companies consolidating the entire industry, which would be disasterous for growth and technological advances. In the end all of it is definitely bad for competition.
The only thing I can think of that would be worse is if government decided to rear its ineffective head and start to heavily regulate this sector of the economy. Google and Microsoft certinaly have the potential to grow into internet monopolies should it advance to that level. However, it is clear that Google has no interest in stunting growth and innovation within the sector (arguably).
When it is all said and done, I think Google is 100% correct the merger will be extremely anti-competitive under the scnario I have outlined. To me this would be an awful outcome, a reduction in competivite market forces is always bad and leads to, less innovation, higher prices, and a lack of new technology. This would also increase the barrier to entry within the online search market, so the next potential "Google" or Microsoft would have a much tougher time developing (if it ever could) and pose a threat to either of these two firms in search.
I also think Microsoft would be better served by focusing more on innovating its search, creating better search technology to compete competitively in the industry, and less time attempting to consolidate the industry and eliminate competition, so it can better compete with Google. I'm sure the government will see it as such. However, i'm sure the plethora of Microsoft lawyers would gladly argue that Yahoo is much less valuable to internet search then Google makes it out to be. It will be interesting to see if shareholders approve the merger.
Thoughts?
Last edited by truthhurts; 02-03-2008 at 09:24 PM..
I agree. Microsoft already has their own search engine at msn.com and yahoo (as well as google) are competitors. Microsoft is only trying to weed down the competition. Yahoo executives want their golden parachute and look for "other" executive positions. Its a big payout for executives who own stock in the company. Its monopolistic for Microsoft to own Yahoo... opps... thats the magic word... monopoly... with government involved, I can only see one thing happening with the yahoo acquisition.... pre-approved
I agree. Microsoft already has their own search engine at msn.com and yahoo (as well as google) are competitors. Microsoft is only trying to weed down the competition. Yahoo executives want their golden parachute and look for "other" executive positions. Its a big payout for executives who own stock in the company. Its monopolistic for Microsoft to own Yahoo... opps... thats the magic word... monopoly... with government involved, I can only see one thing happening with the yahoo acquisition.... pre-approved
Yea evil brings us back to a big problem with political action committees and major companies lobbying for issues, that are not in the best interest of the industry. Now, i'm definitely not advocating companies should lobby in the best interest of society, but that's where law makers come in and should "protect" the free market and expansion of competition. However, MSFT has to many of them in their back pocket.
My fear is not what will happen in the short term, but over the long haul when these companies could easily become a duopoly. I can see MSFT argument in the short run, it could potentially be beneficial to consumers, businesses, and the sector, but over the long haul it is ultimately bad to eliminate competition. The best strategy for each of these companies would be to remain independent and focus on innovation and technological advances on their own. Yahoo, can clearly still compete on its own without the "help" of MSFT coming to the aid of their largest shareholders.
I don't think it's bad for the internet. If it gets really 'bad' it's not too hard for someone to create their own algorithm to create a search engine.
Remember: Myspace used to dominate social websites until a college drop out decided to make facebook.
The internet isn't like other buisness types because there is no barrier's to entry.
Google isn't perfect. They do a lot of little sneaky things. Like trying to put that toolbar in about every freaking piece of software you download these days.
I don't think it's bad for the internet. If it gets really 'bad' it's not too hard for someone to create their own algorithm to create a search engine.
Remember: Myspace used to dominate social websites until a college drop out decided to make facebook.
The internet isn't like other buisness types because there is no barrier's to entry.
Hey Marodi, I tend to agree with you, but in reference to high barriers to entry i was referring to capital investments. Once a duopoly is formed it is extremely hard for a smaller company to get access to capital to take down a duopoly. I mean who would want to take on that risk? Sure someone would, but there would still be a "higher" barrier to entry in search posed by a duoupoly. If they are consistently buying up all of their smaller competitors who is left to compete? Sure maybe a teen will come along with a very innovate way to look at search and perhaps he will get a small following, but if those that have access to large amounts of capital fear nothing can be done to dismantle a duopoly they are definitely going to be less likely to invest in the smaller guy.
Facebook would have not gone as far as it did had it not had a 25 million dollar injection of cash to help it recurite and retain talented programmers. Sure facebook could have said no to venture capital, but it certianly would not have near 35 million users.
In the search market Googlel could definitely use another larger more successful rival, but i highly doubt the merger of Microsoft and Yahoo will make that happen. Merging to combine MSN search and Yahoo search does nothing, but give Microsoft a larger market share. It does not change the fact that Yahoo and Microsoft are unable to compete because they lack the ingenuity, innovation, and efficeny of Google Search. To me this just leaves 2 players with more than 85% of the search market. How is this could for competition? It was much better when three players had 60% 20% and 8% and 12% other. Now it's 60% 28% and 12% for other. How is this good for advertisers and consumers? Like i previously said in the short term it will be great for competition, but in the long term Google and Microsoft will be in a "search" arms race and they percentage will most likely go to 65%(google) 33% (msft&yhoo) and 2% for other (down due to buyouts). Now you have two companies that are dictating over 98% of the prices. This will clearly in the long run not be good for competition.
I guess it could be argued in search that this merger is a great thing, but in terms of the overall bigger picture I cannot see it as such. Unless someone in the 12% other starts to take off and present a formidable foe to either Goog or Microsoftie, which will probably culminate in one of the two companies buying the smaller more successful company out.
What would happen if MSFT buys YHOO and they FAIL to catch GOOG? It looks like they are failing separately. The pundits seem to think this union will cause a different result. I am not as certain. The arguments made seem to be recycled from arguments made against GOOG 3 years ago when most financial reporters were call this and that Google Killers.
If this Union fails, who will be left to challenge them?
Ask any businessman about competition and most will put their competitors ahead of government as their most persistent problems. Existing businesses always strive to create monopolies where they will dominate a market and control prices as well as costs. To an existing business innovation is a dirty word because it is the principal way a rival can compete for customers and profits.
Of course Microsoft wants to buy out Yahoo It is in the best interests of the stockholders and the executives of both companies for this to happen. It is not in the interest of the market and of the consumers of these services. The buyout is not meant to be.
Deals like this are why we need a strong government anti-trust effort. The market cannot “protect” itself from the monopolists. Just look at the history of the markets and see how they become dominated by monopolies like U.S. Steel under Carnegie, Standard Oil under Rockefeller and many others. Monopolies are set up to defend the existing companies against price completion. This merger is just a step in the process of consolidation. The next step is the buyout of Google by the MS/Yahoo consortium. All of these mergers should be prevented by government enforcement of anti-trust laws.
Last edited by GregW; 02-05-2008 at 06:51 AM..
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