Software titan Microsoft’s bold $44.6 billion bid to acquire Internet media company Yahoo Inc on Friday may shake up the industry like no deal has done in a long time. While combating search giant Google’s enormous clout appears to be the main motive of the bid, there is also a quiet Hyderabad connection that could give the global battle an Indian tang.
Microsoft is trying to turn from a maker of software products to a service provider for consumers surfing the Net, somewhat like a printer turning publisher.
<b1>This is an aspect in which it is woefully lacking, especially after Google blazed a new trail with the emergence of search advertisements, virtually unlimited storage in email and freebies that range from blogs and social networking to word-processing software.
When Microsoft tried to win over corporate customers from Sun Microsystems, it used its research and development centre at Hyderabad – its first major R&D centre outside out of its base in Seattle – to develop critical linking software that would help migrate Unix-platform based data to its own Windows-based framework.
When Yahoo stole ahead in the e-mail game, Microsoft acquired Hotmail, founded by Bangalore-born Sabeer Bhatia, only to sort of lose the advantage when Google’s Gmail offered lots of storage and much more around that account.
Now, in a new episode of the same saga to conquer the Internet by winning advertisement revenues – if the Yahoo buyout comes through -- it could be aided by Yahoo’s head of research Prabhakar Raghavan, a technology professor turned corporate researcher, who studied at Hyderabad Public School and IIT, Chennai.
Yahoo also has a corporate office in Mumbai focused on the Indian market and an R&D centre in Bangalore to complete the connection. Raghavan uses abstract mathematics to build technologies that link up to social behaviour and consumer needs. With the rise of user-generated content in blogs and social networking sites like Facebook and Google’s Orkut, advertisements that link up to surfing and social habits is a hot area, in which Dr Raghavan is emerging as a key thinker. (He recently spoke on “How social collaboration makes chatter lucrative”)
Raghavan, who left a professor’s job at the prestigious Stanford University to join Yahoo in 2005, told Hindustan Times during a recent visit to Delhi that Yahoo’s mission was to combine search and banner ads and increasingly take digital advertising to the next frontier.
Yahoo is already the leader in banner advertisements, while Google leads search-based ads that turn up to keywords. Last month, Microsoft also made a $1.2 billion acquisition bid for Norwegian search software firm Fast Search & Transfer, underlining its seriousness in the search space.
Last year, Microsoft agreed to pay $6 billion for the online advertising firm aQuantive, while Yahoo bought Right Media for $680 million and Google acquired DoubleClick for $3.1 billion.
Microsoft said on Friday that that the online advertising market is growing rapidly and expected to reach nearly $80 billion by 2010 from over $40 billion in 2007. It added it is "increasingly dominated by one player," referring to Google.
Google is estimated to hold 77 per cent of the Web search market, while Yahoo is second with 16 per cent. Microsoft’s own search is a distant third with less than 4 per cent.
Yahoo attracts more than 500 million people monthly to a range of media sites including Yahoo Mail, the world's biggest e-mail service for consumers.
At $44.6 billion, the price Microsoft offers for Yahoo is twice the current market value of India’s Infosys, which is valued at about $22 billion – but given the global reach strategic hold that should be cheap for Bill Gates and Company.
The Yahoo bid is the biggest Internet deal since AOL acquire Time-Warner.