Finance Case

The main motive behind the Microsoft-Yahoo deal is to provide real competition to Google's dominant market position in online search and advertising. As it stands, Google holds a market monopoly over delivering search results to web users which they leverage as the best platform for online advertising to secure the loyalty of advertisers. As it stands, yahoo holds a 19% market share to Google's 76% and Microsoft 5%. A merger with Yahoo would afford them many synergies to realize significant market share gains. Microsoft can achieve scale by utilizing Yahoo's existing technological infrastructure including its data farms that allow it to delivery more search queries, index more websites and serve hundreds of millions more customers. Having building a sizable user base will strengthen the value proposition to advertisers. Cost synergies exist in that an acquisition of Yahoo means Microsoft has no need to invest in its own data farms which would prove expensive. There would be expanded research and development capacity from the combined talent of engineers from both companies to deliver new innovations and enhanced user experience. Because Microsoft and Yahoo overlap in terms of services offered (i.e. Email, search, advertising), there would be operational efficiencies by eliminating redundant infrastructure and duplicative operating costs which would improve the financial performance of the combined entity.

Achieving the strategic goal of challenging Google's market monopoly can only be achieved through an acquisition of control in order for Microsoft's management team to effectively erect the decisions necessary to compete with Yahoo. Joint-Ventures are too dependent on integrating company cultures, management styles and competing goals to be effective against a monopoly like Google.