Friday, June 13, 2008

Which one is better: Microhoo or GooHoo?

I find it hard to believe that MSFT can monetize better and generate more cost savings than GOOG. The comparison that you are doing is not apples to apples and somewhat dishonest. If you really want to compare then use the same assumptions in both cases.

Assume that _ALL_ queries are outsourced to GOOG or MSFT and YHOO shuts down its internal search related development and support. In that scenerio, I'm sure the boost in YHOO operating income would be significantly higher with the GOOG deal. The $250-$450M they are talking about is based on long-tail which is hard for YHOO to monetize currently, and I'm sure would be hard for MSFT as well.

The way YHOO-GOOG deal is currently structured, eventually they would have flexibility to move towards the goal of full outsourcing, once all the regulatory hurdles are out of the way. So over the long run, GOOG deal would be less risky and a better choice compared to MSFT deal, in terms of monetizing the search share that YHOO holds.

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