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Microsoft-Yahoo: Implications For India

In India, a Microsoft-Yahoo combine will help fill some gaps: Yahoo (NSDQ: YHOO) has been far more active in the country, with investments in the online classifieds co Consim (Bharatmatrimony.com) and ad network Tyroo. Microsoft (NSDQ: MSFT) will also benefit for a substantial R&D facility that Yahoo has in Bangalore. Microsoft recently invested in Oxigen Services, which gives it access to a retail base for offline transactions.

Advertising:The Tyroo investment was for reaching out to smaller advertisers – creating a larger advertising base; Google (NSDQ: GOOG) dominates the small advertiser segment. Not much differentiation between the two when it comes to portals – even lesser in case of Yahoo and AOL (NYSE: TWX) – but immediate benefit for MSFT-YHOO will be greater say in defining ad rates in the market – currently Rediff (NSDQ: REDF), Yahoo and Google call the shots in India, though Google still dominates search here.

Mobile: Yahoo has launched OneSearch on SMS (no idea of its success, though), and partnered with Reliance Communications – the largest CDMA telco, while Microsoft has Windows live on Vodafone (NYSE: VOD) – the second largest GSM telco. Together, that beats Google’s mobile search deal with India’s largest telco – Airtel. Microsoft’s investment in Oxigen will help offline retail network that will aid the purchase of mobile content.

Local Language Content: Yahoo has more local language content – Gujarati and Punjabi content, apart from Hindi, Kannada, Tamil, Malayalam and Telugu, which both have.

People and Operations: This will be the tricky bit; There are several areas of overlap, and there will be layoffs. Yahoo India is currently operating without a CEO or a country head. Together, they’ll form a larger but slower beast; hardly an ideal situation.

Search: That’s what it’s all about — and not as much the portals. Even together, I don’t think they’ll be able to take on the might of Google in search.

I wonder what the implications for the classifieds section will be – Yahoo had invested in Bharatmatrimony, and MSN has competitor Shaadi.com on board. Will MSN switch to Bharatmatrimony too?

Cerius Shah adds: Yahoo has done considerably well in India since its arrival in 2000. It offers content that is more localized and does better than MSNIndia.com and is marginally ahead of Google on the 2007 Comscore (NSDQ: SCOR) rankings for top sites in the country. There are plans to launch a Bollywood vertical and some more specific plans for a video entertainment overhaul. MSN will be starting its video center offerings soon. When their powers combine, MoYo could probably help build the video advertising foundation built on a road already ploughed by Desktop TV with the wheels of Silverlight, Yahoo’s traffic standing and the combined content aggregation force of MSNIndia.com and Yahoo.

Based on Balmer’s letter to Yahoo’s BOD, one of the primary reasons for the deal is search. They definitely won’t be doing contextual advertising, or probably doing it under a new name. The Tyroo deal as Nikhil pointed out will help but they will look at new acquisitions to buy out media space. There will be a fight for blocking ad-space (maybe by buying and parking) on top aggregators.

Most importantly, it will expand the industry, currently full of incumbents which are either digital side-glances of their traditional properties or one hit wonders run in simulacra of Silicon Valley, and bring in fresh scope for traditionally generated content. In the least, it will help salvage the web from the advertiser snow-blind mobile SMS market.

3 Responses to “Microsoft-Yahoo: Implications For India”

  1. financeguy

    Nikhil – What do you think the implications are for valuations of Indian ad networks? Is this the beginning of a MSFT acquisition spree – starting big and then building its ranks in the internet space through smaller acquisitions? They've already bought aQuantive, and have picked up a stake in Facebook. Do you think they'll try to get a head start in emerging markets – putting companies such as Northgate Tech (Bharatstudents.com) into play?

  2. real issues will show in the Bets Yahoo and MSFT has palced in Mobile Arena . given the fact that india is fastest growing market for Mobile services . Yahoo's Mobile App "Yahoo Go" comes Bundeled with Nokia Nseries devices and Nokia is not betting BIG Time on Windows Mobile . this is a area of conflict . will Yahoo honor its Pre merger commitments ?

    Other Area is Facebook , with Yahoo gone (if that happen ) Facebook will be harpressed for buyer ..IPO doesent look good move in this climate . this will make it easy for MSFT to push Yahoo/Live SERACH on Facebook page and this will give one more veneue to use their Add inventory .

    masterstroke buy MSFT , Good deal for Yahoo if they sell some stake not outright take over . not sure what it means for End user .