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What a Microsoft/Yahoo Combination Means

For small businesses, the pairing of technology giants could be a positive because it would give that other Internet advertising and search powerhouse – Google – a run for the money.
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So Microsoft made an unsolicited multi-billion dollar bid for Yahoo.  It is big news.  Every media outlet, the entire blogosphere, your grandmother, and your hairdresser are weighing in with opinions.

But I am interested in just one question:  What, if anything, does it mean for my small business?
I’d like to suggest that only two things really matter to small businesses in this proposed deal.  Both point toward a Microsoft/Yahoo combo as being a good thing.  Those two things are:

  1.  Would it mean a real alternative to getting found in the search engines, besides Google?
  2. Would it mean another serious contender for a pay-per-click advertising marketplace, besides Google?

Hmmm.  Isn’t it interesting that in both considerations a third party came up -- Google.  

Therein lies the importance of this deal to the 27 million small businesses in this country, and the many millions in other countries.

It’s about competition, and providing a true competitor to Google.  And that would be a good thing for small businesses.

Louise Story wrote in The New York Times recently that this merger is an unusual deal in that instead of limiting competition, as many mergers or acquisitions do, it may create more competition, not less.  And I think that’s a key consideration, despite the comments of Google’s Senior Vice President, David Drummond, who wrote on the official Google blog:

“So Microsoft's hostile bid for Yahoo! raises troubling questions. This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation.”

It’s hard to see how this deal would result in less openness and innovation.  In fact, the case can be made that the just the opposite would occur.

Right now we essentially have one search engine -- Google.  No other company in the search and PPC ad field comes close. 

This deal might give two players that have struggled with their search engines the potential to combine search expertise and resources into something that actually might give Google a run for the money.  Worst case, even if Microsoft acquired Yahoo and somehow made Yahoo search “less open,” we’d still be in the same boat: for all practical purposes, one search engine in town -- name of Google. 

Don’t get me wrong.  I am NOT in the “Google is evil” camp. 

On the contrary, I think all small business owners should get down on their knees and thank Google for giving us a tool like the Google search engine. The Google search engine did more to level the playing field for small businesses to compete right alongside much larger, better-funded businesses, than any other recent innovation I can think of.

The same goes for the pay-per-click advertising marketplace. Google transformed the face of advertising helping small businesses run ad campaigns no matter how small their budgets.  What Google did for small businesses by creating the pay-per-click marketplace was liberating and empowering. It stripped away all the middlemen that drove up so many costs of advertising.  It made the ability to attract customers affordable for small businesses -- and gave us the analytical and measuring tools to prove whether the advertising worked or not.  We no longer had to throw money at ads with a hope and a prayer, guessing whether we got a real return or not.

But things are very different now. Let’s face it, search marketing and pay-per-click advertising are growing up. They both have more importance in the business models of small businesses than they did when Google first introduced them.

Now millions of small businesses all over the world could not survive without search engines and pay per click advertising. 

Blog posts and forum posts have become much more prevalent in the past few years about small businesses feeling at the mercy of Google, out of fear of losing the coveted Google search rankings.  The sense of frustration and helplessness is palpable.   

You see, if a small business’s search rankings go down, its business could literally fail.  Small businesses operate on razor thin margins of success or failure.  Make some inadvertent error, not even realizing the impact of a decision, and -- boom! -- Google drops the rankings -- or worse, removes the site from the search results.  If that happens, there is no viable replacement today.  There’s no advance notice and it’s next to impossible to find out why the action was taken -- the business owner is left to guess. 

The alternative is to buy pay-per-click ads through Google, but that adds more expense. And if there’s only one pay-per-click ad market, there is no natural competition for bidding to keep click costs low. 

It’s hard to see how so much power concentrated in one company is a good thing. 

Would a Microsoft/Yahoo combo really result in a serious competitor to Google?  It’s hard to tell.  One school of thought says that if neither has done it up to now, what’s to say that the two companies squashed together will be any more successful?

That’s a good point and I don’t know the answer.  Most acquisitions do not achieve their stated objectives, so the odds are not good.  But I’d like to see them give it a try.  If Microsoft / Yahoo managed to give Google a real run for the money, it could be a very good thing for small businesses. 

Anita Campbell is a writer, speaker and radio talk show host who closely follows trends in the small business market at her site, Small Business Trends.

Last updated: Feb 1, 2008




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