News For Profit

CASE STUDY: Microsoft-Yahoo: an unsuccessful business merger

Forget about barriers. Forget about differences. Cyberspace is everybody’s home. And corporations exist there, too.  The internet is prime market for big business endeavors, and many traditional media companies are looking to get in on the action.  That means information and news are increasingly being viewed as the commodities they've become.

The main tools for navigating the Internet are search engines. Users depend on Google and Yahoo as information guides for the massive World Wide Web. Without these filters, the Internet would exist as a disorganized collection of sites with little structure, organization, or network. As more and more people visit these sites everyday, it is no wonder Microsoft wants to expand its piece of the virtual pie.

On Feb. 1, 2008, Microsoft, the world’s largest software company, announced its desire to purchase Yahoo to create a new powerful player in the search engine market. Why would a computer software business empire want to expand to Internet ownership? The answer is simple: money. The Internet is the new market for online advertising and a growing source for consumption. As technology improves and spreads globally, net ads are progressing into one of the most profitable ways to earn money. And money leads to power.

Microsoft’s motivation for buying Yahoo lies within the Google domain. Google is not only the leader in the rankings of search engines but also recently added DoubleClick, a major advertising service, to their résumé. Microsoft’s Chief Executive Officer, Steve Ballmer, proposed the Yahoo purchase as a device for building a strong competitor to Google.

This becomes a complex issue when quality and access of information is undermined by motives of profit. Microsoft’s interest in the Internet is financially driven, using the media for corporate growth. The combination of these search engines threatens the availability of information due to joint filtering. Therefore, when using these search engines, the selection would decrease and the audience would have access to less and less information. So, the quantity and quality of news access would be directly affected by the union of two search tools. What happens when media is used in a business deal?

Phase I: Microsoft Desperately Seeking Yahoo

Microsoft’s position in the media market has consistently declined. Still hungry for advertising power, the corporation proposed to buy Yahoo on Feb. 1 for $44.6 billion. After days of careful evaluation, Yahoo´s answer was no. On Feb. 11, a Yahoo press release revealed their perspective of the situation:

“After careful evaluation, the Board believes that Microsoft’s proposal substantially undervalues Yahoo including our global brand, large world wide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well our substantial and consolidated investments.”

Phase II: Yahoo Dismissing Microsoft

Frustrated with Yahoo’s rejection, Microsoft CEO Ballmer sent a letter to Yahoo CEO Jerry Yang and his Board on April 5th. To refuel the proposal and convince Yahoo to finally accept it, Ballmer enforced a deadline of only three weeks. If no response was delivered by Yahoo, consequences were outlined:

“Due to the importance of these discussions and the value represented by our proposal, we expect the Yahoo Board to engage in a full review of our proposal. (…) Depending of the nature of your response, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo’s shareholders are provided with the opportunity to realize the value inherent in our proposal.”

Two days later Yahoo refused the offer for the second time. While they were not opposed to the merger, they wanted more money. Was access to online information at risk? Were the administrators of media corporations treating information as a commodity?

Phase III: Google Remains on Top

Throughout Microsoft’s persistence to purchase Yahoo, Google was closely paying attention. CEO Eric Schmidt verbalized that “Google was concerned about the deal and said it could have implications for the openness of the Internet.”

Was Google´s concern for the Internet a cover for their fear that the merger would harm their business? Or was it a legitimate concern for quality of online information?

The answer to these questions was not revealed because the merger was called off.

Media covered the story from different perspectives and angles. Some chose to emphasize the business deal and financial issues while others stressed the impact of the merger on Internet information and public access. The following headlines represent the multiple views media used when telling the story:

The same day, the same media covered the story presenting the other angle:

Do these headlines represent the full story? If not, which headline would you use in order to be accurate? Do you think it´s possible to include every angle in one story?

When business and media mix, a controversial combination may evolve. Nowadays, owning information is owning power: information is an object that millions of people are struggling to acquire. The transformation of data into a commodity is a consequence of the relationship between markets and media. No matter where the corporations are placed, Cyberspace is now a universal market. And advertising is the primary way of earning money in this setting. Monitoring how media develops in a business-controlled enviorement is important to protect the integrity of the information industry.

The way in which Microsoft constructed its business plan focused more on the business and less on the plan. How should public information be treated? Is it a service for the people provided by the business corporations? Or is it a tool serving those business corporations?