By now everyone has heard the big news of Microsoft’s $42 billion offer to buy Yahoo! We’ve heard primarily about how it will help Microsoft compete with Google. We’ve also heard about the concerns Yahoo! staffers have over the effect a merger may have on their corporate culture. But the question here at GARA Systems is how will this merger, should it take place, affect small businesses? I believe we will be directly affected in two markets that are very important to us.
Online Advertising
Google has long dominated the market for online advertising with their AdWords and AdSense programs. Both are programs frequently used by small businesses to advertise their wares and to generate income from their website traffic. GARA Systems uses both programs.
Google makes money … lots of it … by charging advertisers for ad placement (via AdWords) within their search results and third-party “publisher” websites. When the ad is found on the Google search results page, they get the full cost. When the ad is placed on a third-party site (via AdSense) a share of the ad cost is paid to the site publisher. Google does not reveal what the share is, but they say they keep the publisher share high-enough to compete with other ad networks. The problem, there aren’t really any other ad networks that come close to the market share Google has. If you are an advertiser that wants to reach the largest audience you use Google AdWords. If you are a website publisher that wants access to the most advertisers you use Google AdSense.
An MS-Yahoo! merger will increase competition in these markets. I would expect that Microsoft, in order to capture some of Google’s market share will offer attractive deals to both advertisers and publishers. Of course Google will need to respond in kind.
I believe this will be good for small businesses that advertise on the net and small websites that use ad publishing as an income source.
Microsoft’s Desktop Domination
Microsoft has long dominated the desktop software market. However, with the maturing of open source projects, they are increasingly having to face competition from alternatives like GNU/Linux, OpenOffice, Mozilla and more.
Acquiring Yahoo! means that Microsoft will now have control over one of the most visited sites on the Internet. I fully expect they will use that position to drive more people towards using their software products. This can happen in many ways. They may simply use the medium to promote their products. That’s not so bad. I’m not anti-MS and certainly don’t begrudge a company promoting their own products.
However, the merger could have other consequences. We may see Microsoft modify certain Yahoo! services, like email, to only work - or work better - with Windows and/or Internet Explorer and the like. Have you ever noticed that you can’t use the Windows Update service with Firefox? This can drive users towards using MS products more exclusively resulting in less support for open source and other alternatives.
I believe this will be bad for small businesses as we will increasingly find ourselves locked-in to Microsoft products. Microsoft may in fact be using this move, not only to compete with Google in search and advertising, but to sure up their position on the desktop as well as the emerging mobile device market.
I think that it’s important that we do not succumb to that. I use Yahoo! web hosting and email services currently. The email is platform independent and the web hosting is built on a LAMP stack. If a post-merger MS makes moves to eliminate these alternatives - although I would welcome the addition of a MS-based hosting alternative - I will be switching my services in short order. If enough small businesses that use Yahoo! services hold this position, then perhaps Microsoft won’t be so quick to eliminate their competition.
Conclusion
So, will a Microsoft - Yahoo! merger be good for small business or not. I guess at this point, I have mixed feeling on the issue. I welcome the increased competition in the advertising and search market. Within that market place I think the merger will serve us well. However, I am concerned about Microsoft’s further subjugation of the desktop. I do believe that we can mitigate that dominance by our insistence on non-MS alternatives - at least enough to keep them honest. Who knows … we may even be able to get Microsoft to open a bit more. I think that would be good for everyone, even them.
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