08 May 2008

Microsoft's failed takeover bid for Yahoo!: trends and implications

If you have an internet connection and spend any time at all browsing the headlines, then you must have heard about Microsoft's plan to buyout Yahoo!. When the news first got out in early February 2008, it shook the very foundations of the Search world.

Yahoo! was one of the first search engines to pioneer and dominate the search market following its incorporation on March 1, 1995 - before which Yahoo! was essentially a couple of guys who wanted to keep track of their interests online.

The reasons for Microsoft's intended buyout were obvious: eliminate the competition and expand in order to effectively compete in the search market - and with $44 billion on the table, popular search engine Yahoo! seemed like a logical choice, especially with Google breathing down the necks of both parties.
















Microsoft's offer had many implications, both internal - in the shape of products and services offered - and external. in terms of market trends and stock prices. When the news of the bid was first released, following the departure of Yahoo!'s former CEO, Terry Semel, Yahoo!'s stock prices went through the roof, with a jump from $19.18 per share to $28.38 in one day.

After this time, the stock started fluctuating wildly in anticipation of Yahoo!'s decision (or lack thereof), and ending with a dive from $28.67 to $24.37 per share.











During this period, Yahoo!'s technical search team was very busy with new gadgets and functionalities, and new products streamed out of Yahoo!'s labs. In recent months there have been many beta releases and functionalities, some very interesting, others predicted to have no more than a short life span.

All Yahoo!'s new functionalities can be found on Yahoo!'s Search Blog. One of the most interesting innovations has been the recent shift towards an open search infrastructure (project code: SearchMonkey), which enables third parties to build and present their own customised search result entries.

Other fascinating developments are the extension of Search Assist to countries other than the US, and the introduction of SearchScan, which looks out for browser exploits, dangerous downloads and unsolicited email within its returned search results.

It seems that Microsoft's offer may have helped Yahoo!'s period of creativity to flourish - by giving them the impetus to show their fighting spirit. Or perhaps Yahoo!'s developments would have been progressing just as efficiently without the deal hanging over their heads - either way, the long-term effect of the failure of the Yahoo!-Microsoft deal on the search pioneer's stock prices will be key to deciding the path it will take in months to come.

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