Yahoo, Microsoft and Google

Ian Schafer has it about right: What Microsoft sees in Yahoo is the chance to increase its ad serving reach, cover more of the market, and improve not only reach and frequency but also the third all-important, beyond “GRP” component in today’s ad sphere: targeting. Both Microsoft and Yahoo have been in furious competition with Google and AOL (and each other) to build or buy ad platforms like Blue Lithium and aQuantive that have a variety of ad-serving, targeting and amalgamating solutions for a networked society.

One thing Schafer hopes for (and Henry Blodget calls for) doesn’t seem likely: that Microsoft will let the Yahoo brand live separately and distinctly. Not only does that not seem to be the Microsoft way, it also would make it hard to achieve some of those efficiencies Microsoft keeps talking about. Ask yourself, if Microsoft buys Yahoo:

• Will they subsume their Hotmail (integrated with Passport and .msn) into Yahoo’s mail? Or are they more likely to migrate Yahoo’s mail over to MSN?

• Are they likely to let Yahoo’s small business and Web hosting area live on its own, or try to migrate all that small- and medium-sized business over to Microsoft (encouraging it all the while to buy Microsoft Office products)?

• Will they let Yahoo’s social networking and blogging and tagging and bookmarking properties live separately, or try to integrate them into Microsoft’s properties, trying to get some long-missing traction for Microsoft’s initiatives?

Blodget talks a lot about the different cultures and the difficulties of integrating the two companies, how Microsoft is already battling on many fronts and is unlikely to be able to fight all these battles and make itself into a GE-like conglomerate. He also talks of Google’s play to help Yahoo stay out of Microsoft clutches and in his post and another alludes to Google’s “Ahabian” desire to sink Microsoft’s Office products with cloud computing Web software.

All that cultural stuff is big, and important, and he’s right that senior execs at Yahoo, and Microsoft’s Internet division, will be working scared for the foreseeable future. But, as said above, the real rubber and the real road here is advertising reach and targeting. That’s what has to work for this deal to be worth Microsoft’s while.