WASHINGTON—Google Inc. has continued to gain Internet search engine market share away from rivals Yahoo! Inc. and Microsoft Corp.
According to March 2008 statistics provided by Market Share, Google now controls 77.7 percent of the search market, while Yahoo and Microsoft/MSN slipped to 12 and 3.2 percent, respectively.
In the Web browser wars, Mozilla Firefox—a free, open-source product developed the Mozilla Foundation—has slowly eroded Microsoft Internet Explorer's dominant market position. Internet Explorer's market share decreased slightly compared to February, while Firefox's market share increased 0.50 percent.
Unwelcome Takeover
Yahoo has been hinting at a sale for months, but not at the price Microsoft was willing to offer. The latest Microsoft bid, at $31 per share—for a total of $44.6 billion—was deemed inadequate by Yahoo management.
Two days after Microsoft CEO Steve Ballmer gave Yahoo a three-week deadline to accept the deal or face a proxy battle in the boardroom, Yahoo again defiantly rejected the offer.
In a reply to Microsoft this week, Yahoo CEO Jerry Yang again reiterated that "[the current offer] was not in the best interests of Yahoo and our stockholders."
For its part, Yahoo recently painted a rosy picture about the company's financial fortunes during an investor conference.
Analysts believe that Yahoo's forecast was overly optimistic and was aimed to bedazzle investors to pump more money into the company. Yahoo's objective is to almost double cash flow from operations from $1.9 billion in 2007 to $3.7 billion by 2010.
The company is forecasting a 2.6 percent increase in revenue to $8.8 billion by 2010. It's unclear how Yahoo would double cash flows given its modest revenue projections.
"If Yahoo really wants Microsoft to raise its bid perhaps it should ditch the overly optimistic projection into 2010 and say the following: We know media. You don't. You have to learn media or you're toast," said Larry Dignan, chief editor of ZDNET, a Web-based interactive media site, in a recent article.
Experts Get the Scoop
"Things have been quiet, very quiet at Yahoo and Microsoft this week, and that means one thing to me: A deal between the two has to be getting ever closer ... and Microsoft has essentially gone radio silent," said blogger Kara Swisher on the blog called "All Things Digital," owned by the Wall Street Journal.
Not everyone buys into the value of a Microsoft-Yahoo marriage. "I can't see how Microsoft buying an ad network filled with junk clicks will really move Ballmer toward his goal of catching Google. Yahoo is already far behind Google in this business, and Microsoft's own efforts are far from stellar," said Dave Methin in InformationWeek's article "A Microsoft-Yahoo Ad Network Still Isn't Google."
Wharton School of Business professors suggested that Microsoft has no choice but to get Yahoo into its fold if it truly wants to become a serious competitor to Google, which already has 75 percent market share in online advertising.
The Wharton experts say that Microsoft is rather stubborn, and once it sinks its teeth into something, it won't give up, even faced with losing billions of dollars. Microsoft learns from blunders and quietly moves forward until it hits gold, as it finally did with the Xbox video game system. Professor Larry Hrebiniak was part of Microsoft's Xbox team and spoke from experience about Microsoft's strategy.
Microsoft jumped into the video game industry without doing much market research. "They assumed because they had the capabilities and software, because they were Microsoft, because they had all of this money, they were going to break into a whole new market. They didn't really do the industry analysis, the competitor analysis," said Hrebiniak, a management professor at Wharton.
There are two issues Wharton experts are puzzled about. News from Yahoo and Microsoft have all been about increasing stockholders wealth, competition with Google, gaining market share, changing culture, and so on. But the improvements customers can expect have been absent from all discussions.
"I'm hoping that the customer benefits. I'm hoping that there would be some increased competition, but right now I'm not 100 percent convinced that the consumer or the customer is going to win from this. I think that the company [Microsoft] is more focused on how they are going to win and beat each other," Hrebiniak said.
Historically, Microsoft has regarded its ability to internally develop technology as paramount to success. Now the company has turned around completely, making acquisitions and attracting talent from competitors. Its sudden gunslinger corporate culture doesn't sit well with some Microsoft veterans, sources say.
"So, not only do you have a potential cultural integration issue between Yahoo and Microsoft, you have some cultural problems from within Microsoft that you have to worry about," said Hrebiniak.
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