Google Plans To Fight Microsoft-Yahoo

Google won't let Microsoft and Yahoo merge without a fight

Late last week DailyTech covered Microsoft's landmark $44.6 billion unsolicited bid for Yahoo, which threatened to transform the online business landscape overnight. While the outcome at first seem uncertain, opposition to the move quickly evaporated with the resignation of former CEO and Chairman at-the-time, Terry Semel.

Semel had strongly criticized the merger as not in Yahoo's best interests. With Semel's resignation, and landmark tough times for Yahoo, a deal seems so likely many analysts are already calling it a sure thing.

Meanwhile, Google remained quiet during Microsoft's initial announcements. However, now the giant has come out swinging again the merger, which represents a serious threat to its online dominance.

David Drummond, Senior Vice President, Corporate Development and Chief Legal Officer has posted a warning to Microsoft and Yahoo in his Google blog. In the blog he blasts the "hostile bid," stating, "Microsoft's hostile bid for Yahoo! raises troubling questions. This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation."

He implies that Google, and a pre-merger Yahoo represent openess and freedom of the Internet. He implies that a Microsoft-Yahoo merger may mark a move towards staleness, proprietary systems, and most notably, monopolistic practices.

He adds the provocative question, "Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC? While the Internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies -- and then leverage its dominance into new, adjacent markets."

He continues, "Could the acquisition of Yahoo! allow Microsoft -- despite its legacy of serious legal and regulatory offenses -- to extend unfair practices from browsers and operating systems to the Internet? In addition, Microsoft plus Yahoo! equals an overwhelming share of instant messaging and web email accounts. And between them, the two companies operate the two most heavily trafficked portals on the Internet. Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors' email, IM, and web-based services? Policymakers around the world need to ask these questions -- and consumers deserve satisfying answers."

The blog, particularly coming from Google's top legal brass, seems to unmistakably imply that should Yahoo accept Microsoft's bid, Google would lobby for legal action to block the merger.

Google would likely argue that a Microsoft-Yahoo union would craft a monopoly or would open the door to anticompetitive practices. Its strongest evidence would be in the effects of the merger on total traffic and instant messaging use. Yahoo's properties still ranked number one in terms of traffic last year. A Microsoft-Yahoo team would certainly be the most visited set of properties. Further, a union between Microsoft and Yahoo would mean that Yahoo's titular messaging software and Microsoft's MSN Messenger would create a strong new leader in terms of instant messaging market share, according to Google.

Google would have a tougher time criticizing the merger in terms of advertising revenue and search engine traffic. Even with the merger, Google would currently still control approximately two-thirds of search engine traffic. Google would also maintain an advertising revenue lead, by most estimates.

While a Microsoft-Yahoo merger would represent a significant boost to Microsoft's power, it could also bring serious legal woes for both companies. With a hostile legal environment in the U.S. and abroad, and pressure from Google sure to be strongly applied, the real test may not be whether Yahoo accepts Microsoft's offer, but rather whether the accepted offer can survive international antitrust courts.