Microsoft’s Yahoo bid

Microsoft has offered to buy Yahoo, a move that clearly indicates it believes Google to be a threat, and also that Google may be vulnerable. The move comes after a slower-than-expected quarterly growth rate from Google and a better-than-expected result from Yahoo (though the results didn’t help the stock). This action will clearly raise a lot of regulatory interest, but it is believed that regulators are already concerned about Google’s power in online search and advertising and might give the deal a nod. We think this is an indication that the web search and advertising market will be much more competitive in 2008 and that M&A by both parties is now more likely.