BUSINESS BLOGS
BUSINESS BLOGS
category: business
04 Feb 2008

Google is publicly concerned about the MSFT/YHOO deal.

Google is to search and online advertising what Microsoft is to operating systems and productivity suites. You can come to your own conclusions, but I think both are successful monopolies, and I don’t even mean that in a bad way. Google stole Yahoo!’s lunch in search and in advertising online, because of that, Yahoo! became vulnerable.

Look at this graph, as you can see,

Yahoo! had started to stage a comeback after the dot com crash, but then once Google IPO’d and began to outgrow Yahoo!, then all investors looking for exposure to online advertising and search took their capital and invested in Google.

Over time, Yahoo!’s operational weaknesses combined with a lowered demand for Yahoo! stock made it vulnerable to a takeover. I had long stated that so long as investors handicap Yahoo! to Google, it will look like the ugly stepsister and before long, its stock would be so deflated that it would be bought out.

All in all, Google is right and allowed to take this position, but Google now realizes more than ever that they can no longer remain a one-trick pony.

The timing of it all is pretty interesting: Google’s no-can-do-wrong investment track record finally came to an end. I wonder looking back if Google’s stock trajectory will follow Microsoft’s in the 21st century: essentially flat.

Incidentally, Mark Cuban - who sold Broadcast.com for $5.7B to Yahoo! - argues the same point: that Google’s day of using Yahoo! as its whipping boy comparable are over, and as such, represent a bad omen for Google stock.