Google. The big winner out of this Microhoo mess is Google hands down. Let's think about this: Google benefits because
Microsoft admitted that its Web strategy wasn't up to snuff. Google also got to play spoiler and landed a search test with Yahoo that it would have never happened if it weren't for the Microsoft bid. Even better for Google: Yahoo could be forced by shareholders to outsource search to Google in a larger partnership just to improve monetization. In the long run, outsourcing search to Google is likely to be detrimental to Yahoo, which will cede search market share and perhaps mindshare too. A pact with Yahoo will likely speed up Google's march toward becoming a search monopoly.
Rupert Murdoch. MySpace just became more valuable. There are only a few companies that Ballmer has mentioned as having the scale to boost Microsoft's online advertising strategy and MySpace was one of them. MySpace is a property that is hard to monetize, but the inventory is certainly there. Murdoch has reportedly talked to Microsoft already and a big payday could be had for Rupe.
Time Warner, which has a few alternatives to dump AOL. AOL isn't the best property in the world, but it has two things going for it: An owner that wants to offload it and lots of ad inventory. Time Warner now has three options to sell AOL: Microsoft, Yahoo and Google, who already owns a chunk of it and could buy it just as a defensive move.
Any Internet property with any scale. It's clear that Microsoft will go shopping. It has a $44 billion budget. Valuations of Internet companies will melt up just because Microsoft is buying. Facebook becomes an even bigger prize.
Neutral...
Microsoft. Walking away from Yahoo was the right thing to do. The Yahoo deal would have been toxic for the company and a
distraction to say the least. Microsoft also showed a decent bit of discipline by not going to the arguably ridiculous price of $37 Yahoo was asking. Ballmer also made more than a few mistakes in this Yahoo negotiation and at times he looked like a lovesick teenager. Overall though, Microsoft lives to fight another day. The problem: Microsoft's Web strategy is clearly lacking. Microsoft's plan B will include acquisitions, but there's a higher level rethinking in order. To date, Microsoft has been enamored with the concept of acquiring a huge amount of ad inventory via a media company. However, Microsoft already has a massive untapped audience. Why not advertise on Windows? What if it opened Office to the Web completely? Suddenly, Microsoft would have scale and be able to stick to its knitting. Would that Plan B work? Who knows, but it should be considered.
Losers...
Yahoo. The pressure is now on Yahoo CEO Jerry Yang. He has to deliver on his optimistic plan for 2010, hit his quarterly targets, navigate a deal with Google that may not be in the company's long-term interest, face shareholder lawsuits and daily second guessing. Simply put, Yang will have a lot explaining to do with institutional shareholders. Another thread: Microsoft most likely made a lot of Yahoo employees whole on their stock options. That's over now and morale is likely to fall with the stock price. While this Microhoo saga defined Ballmer it will also define Yang. Will Yang be known as the guy that couldn't let go at the expense of his shareholders?
Capital World Investors. On April 10, Capital World disclosed that now holds more than 10 percent of Yahoo shares, or 135,542,600 shares, up from 69,647,000 on Dec. 31. In other words, Capital World Investors doubled down in a big bet that Yang would take Microsoft's offer. Rest assured Yang will be talking to Capital World soon if he hasn't heard from them already.
