in Digital Marketing [dot] com

As a Digital Marketer I think this is definitely one of the most important (if not the most important) news for 2008, and we are just in February.

First it was Microsoft investing in Facebook, now Microsoft is making a bid to acquire Yahoo for $44.6 Billion in order to create a powerful merger that will help both companies compete against Google.

Yahoo continues to struggle against Google in the race for online-advertising revenue and Internet-search market share.

Yahoo stock closed at $19.18 at market close on Jan 31st 2008, this offer, $31 a share in cash and stock, is a 62% premium to yesterdays closing price. The market has yet opened and Yahoo stock is already at $30+ in premarket pricing (Feb 1st 8:05am)

Microsoft said Yahoo holders would be able to trade their shares for cash or 0.9509 Microsoft shares a piece, with no more than half of the overall purchase price paid in cash.

Microsoft has been talking to Yahoo since late 2006 but had not come to any agreement. Those talks included the potential of a merger proposal, but Yahoo told Microsoft in February it wasn’t interest in buyout talk.

“While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing,” said Microsoft CEO Steve Ballmer

He noted Yahoo’s decision at the time was based on the “potential upside” of its own plans and a “significant organizational alignment,” led by the long-awaited overhaul to its search-advertising system dubbed Project Panama.

“A year has gone by, and the competitive situation has not improved,” Steve Ballmer wrote.

“We have great respect for Yahoo, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market,” said Ballmer in a statement accompanying the letter. “We believe our combination will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners.”

It has been obvious that online advertising is “increasingly dominated by one player. Microsoft believes that together, Microsoft and Yahoo can offer competitive choice while better fulfilling the needs of customers and partners.”

This deal would also result in “combined engineering talent to accelerate innovation,” in the online advertising industry.

Buying Yahoo would theoretically place Microsoft as significant competitor in the Internet search market, where it has so far lagged behind both Yahoo and Google.

The proposal is subject to the negotiation of a definitive agreement between the two companies. Microsoft is saying a deal could close in the second half of the year.

But what would this mean for Digital Marketers ?

Would it be better ? Would it be worst ? What do you think ?

Microsoft has more information on their website about this proposed acquisition:

Read the press release

Download the related PowerPoint presentation (.ppt file, 2.3 mb)