It is not about search
Vineet’s post made me think about the logic behind microsoft, yahoo deal. If it is obvious to everyone that even a combined yahoo and microsoft can not beat google then why is microsoft paying so much of money to buy yahoo?
Because microsoft is getting yahoo damn cheap. Yahoo gets as much or more traffic than google. Google earns almost all of its earnings from advertisement. More than 80% of that earning comes from its partner network. Which means it earns 80% of the earning from advertisement on its pages. Now if yahoo gets as much traffic as google, why should it not get as much of earning?
As a matter of fact, yahoo should be able charge a premium over google. On google all you know about a person’s interest is the keywords he enters into the search box. On yahoo answer he enters the exact question he is looking for. It can not get more accurate than that. Users at yahoo spend far more time than the users of google. That should enable companies to engage with users better.
Yahoo has some of the best products. Yahoo mail, messenger, flickr, yahoo finance, yahoo answer. These are by far the best products available in their resepctive categories. Most importantly yahoo has some of the best brains working for it.
Bottomline: Yahoo is getting sold far too cheap. It is a damn good investment if you have 40 odd billion with you 
By the way you can Ducan’s views on the acquisition here
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