Microsoft takes aim at Google

Global - Microsoft is aiming to close the gap on Google's dominance of the online search advertising market via a  hostile US$44.6 billion takeover bid for Google rival Yahoo! But will it be enough?

Late Friday, Microsoft announced it was making a bid for all the outstanding shares of Yahoo!, representing a industry-breaking takeover deal worth around US$44.6 billion.

Google dominates the search advertising market, where it generates the majority of its revenue. ComScore data shows that Google commands a strong lead in online search at 77%, compared to Yahoo!'s 16% and Microsoft at a mere 3.7%.

In a statement, Microsoft said online advertising is growing at a "very fast pace", from more than US$40 billion in 2007 to nearly US$80 billion by 2010, but said the market was dominated by one player.

"Together, Microsoft and Yahoo! can offer a competitive choice while better fulfilling the needs of customers and partners," the statement said.

"The combination of Microsoft and Yahoo! will create a more competitive marketplace by establishing a compelling number two competitor for Internet search and online advertising. The alternative scenarios only lead to less competition on the Internet."

On Sunday (3 February) Google shot back, saying Microsoft's bid raised "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," the company said in a statement.

"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."

Speaking on a Microsoft webcast, Steve Ballmer, Microsoft chief executive, said this deal was the right path for Microsoft and for Yahoo!

"This is a decision we've thought and I've personally thought long and hard about and we're very very confident that this is the right path for Microsoft and for Yahoo!," Ballmer said.