An interesting development is Microsoft’s bid to buy Yahoo. This would be one of the biggest mergers, and change the nature of the internet.
It is rather ironic that Google, have filed a complaint on the ground the new firm would have too much market power. It is interesting because it was Microsoft who was once seen as dominating the computer industry. But, it seems increasingly the case that it is Google which is looked upto as the dominating firm in the industry. The reason for the shift is simply that Google are dominating the biggest areas of growth – which is online advertising.
Microsoft has monopoly power in software like Microsoft Word, but, it is expected that people will increasingly choose software that can be downloaded online. Google’s dominance of search engines and online advertising mean that they will be in a position to benefit from this.
With regard to online advertising and search engines, Microsoft have only a tiny market share (2.9%) (through MSN – despite frequent relaunches). It seems Microsoft have tried to improve their search technology too late and it looks very difficult for them to dislodge Google’s position as the dominant player (62.5%). Therefore, to give themselves a chance Microsoft are seeking to buy Yahoo, who have a reasonably respectable share of the market at about 22%.
The new firm will only have about 20% of the market share. On the one hand you could argue that if Yahoo and Microsoft share resources they will be in a better postion to counter the monopoly power of Google. On the other hand, it could be argued that the merger will lead to a reduction in competition.
However, it could be argued Microsoft may try use its monopoly power in operating systems to try and push its new online search. It is an interesting dilemna