Throw another blog on the fire – Microsoft, Yahoo!, and the real potential of this deal

Okay so every blogger in the world is writing this post this morning, but how can I NOT write about this??? Microsoft is going to buy Yahoo! – ??!?!?!

While I’ve already seen blogs and even facebook statuses and twitters debating why this is happening, the reality is Microsoft needed to find a way to make Google sweat, and all it might take them is a cool 44 billion. But I’m a firm believer this acquisition could give them the potential to do so much more…

While media consolidation is interesting (my eyes are still peeled to see how well CTV Globemedia can leverage the CHUM deal), online consolidation is a completely different beast altogether. The interactivity and, more importantly, interoperability of the web makes this deal compelling from every possible standpoint – but what you’re going to hear about most are the areas of online advertising and, of course, search. The closest traditional analogy I can think of from the perspective of number two and three getting together to knock off number one is when Adidas and RBK joined forces to take on Nike but the reality is that combining sales statistics for sneakers doesn’t come close to the power of Microsoft and Yahoo! combining their audiences and their search platforms to take on the undisputed world #1 in search. But there’s something else that needs to be considered here.

Microsoft CEO Steve Balmer sent a letter to the Yahoo! Board of Directors pointing to four factors where this deal would most benefit the company – scale economics, operational efficiency (very obviously on both accounts), expanded R&D capacity (always an important consideration in the online world given Google’s massive budget in this area) and emerging user experiences. In a time when the web’s hottest properties are all about the user experience, this fourth factor could become the most compelling one in this deal. And until it happens, it could be the least discussed as it doesn’t point to the immediate bottom line.

Considering both company’s inroads in the world of email and large-scale portals, the potential is here to redefine how a massive percentage of the online audiences uses the web and communicates – this going well beyond the narrow channels of searches and clickthroughs that the finance folks will be making heavy mention of as the deal progresses. Just think about how MySpace, YouTube and Facebook have revolutionized the use of the web and, in the process, the way that worlds of advertising and marketing communicate and target key audiences. If two giants could some how bump heads and come up with concepts that innovate the way that the aforementioned one-time little guys did, this deal could signify the real dawn of the much talked-about and as yet unseen Web 3.0.
The reality is, I could write about this all day. And I’m sure there are those who will. But let’s just leave it at this, sit back and wait and see if Microsoft can turn a 44 billion dollar investment into a 44 billion dollar success – and perhaps find a way to change the online world forever in the process…