Beyond Search and Advertising

If Microsoft purchases Yahoo, the popular Internet property would contribute a lot more than ad revenue.

Last week, Microsoft made an unsolicited $44.6 billion offer to buy Yahoo. According to its website, Yahoo is still reviewing the bid, and the offer has generated a flurry of speculation about the possible results, including a statement from Google that raises the possibility that a Microsoft purchase of Yahoo could lead to unfair competition. Some experts say that Microsoft is after more than just the obvious--increased market share in online search and advertising--and point to other assets in the Yahoo portfolio.

Credit: Kenn Kiser (foreground) / Technology Review

Charlene Li, an analyst with Forrester Research, thinks that, in addition to Yahoo's search and advertising capabilities, its social and mobile technologies play "a significant role" in Microsoft's interest. She points especially to Yahoo's ownership of social-computing powerhouses Flickr, a popular photo-sharing site, and del.icio.us, which started a trend of social bookmarking. "These are great brands, and centerpieces for how people interact with each other," Li says. She adds that part of the appeal of del.icio.us is the social search it empowers, since tags that users add to pages give an additional way of determining those pages' relevancy. "It's a democratization of [key Google ranking software] PageRank in many ways," she says. Li also notes that Yahoo's Go Internet portal for mobile phones could be appealing to Microsoft. The Yahoo interface might complement Microsoft's Windows Mobile operating system, she says, which, in her opinion, still lacks a good user interface.

Lawrence Ricci, an industry consultant who specializes in embedded systems, says that he thinks Yahoo properties like Flickr are attractive to Microsoft in part because they could be closely integrated with devices such as digital cameras that use Microsoft's Windows Embedded operating system. "I suspect that one of their motivations is, they want to make sure that everyone who has a Microsoft embedded device will have access to the services that they need to make that device come alive," he says.