Microsoft offers $44.6B for Yahoo

[lord of the mark]

the purpose of business depends on your POV.

But fundamentally, in terms of neoclassical economic theory, the "purpose" is different for the owners than for society. For the owners the purpose is to maximize shareholder value - for society, its to maximize social welfare. Neoclassical economics purports to demonstrate why, with the exception of certain market failures, companies doing the former in a free market economy, does the latter. Where it does not, govt interventions are called for so that they do.

As for coming up with a new use for an existing technology, that can be an important form of innovation. Thomas Edison originally thought sound recording would mainly be useful in business, and IIUC dindt envision the recording of music, for example.

[MarkG]

monopolies calling other monopolies, "monopolies"

http://news.bbc.co.uk/1/hi/business/7225599.stm

Google troubled by Microsoft move

Google has said it finds Microsoft's $44.6bn ($22.65bn) bid to buy rival Yahoo "troubling" and wants regulators to scrutinise the proposed deal.

In a blog, Google said the tie-up could unfairly limit the ability of consumers to freely access competitors' email and instant messaging services.

It said Microsoft had previously sought "to establish proprietary monopolies".

Microsoft made an unsolicited offer for Yahoo on Friday, and Yahoo has said it is considering the proposal.

Microsoft's Kevin Johnson said that the combination of the two companies would create an entity that could better compete with Google.

"Today the market [for online search and advertising] is increasingly dominated by one player," he said.

But that view is not held by the top executives at Google.

'Underlying principles'

"Microsoft's hostile bid for Yahoo raises troubling questions," said David Drummond, Google's senior vice president for corporate development and chief legal officer.

"This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation," he said in a company blog.

Mr Drummond claimed Microsoft may attempt to exert an "inappropriate... influence" over the internet.

"While the internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies - and then leverage its dominance into new, adjacent markets," he said.

The EU competition regulator has launched a series of investigations into Microsoft

[Asher]

I think it's called "politicking", Mark.

[DanS]

Originally posted by MarkG
monopolies calling other monopolies, "monopolies"

There's at least one relevant distinction here. Microsoft has been judged in a court of law to be a monopoly and to have at least once in the past used its market power unfairly in the internet apps space.

[Asher]

Microsoft has been judged in a court of law to be a monopoly

Not in this market.

Why are you so scared about this transaction, Dan? It's like you're in preemptive damage control.

And the "monopoly" MS was convicted in wasn't the "internet apps" space, the monopoly was in the "operating systems" space...

[snoopy369]

There's another, which is that (currently) MS has one significant potentially abused advantage over Google; they control the OS and the marketshare-leading browser. Yahoo! is not only a competitor in terms of email, web portal, and search ads, but they also have a lucrative partnership with AT&T DSL; at least as of two years ago, when you signed up with AT&T (then SBC) internet, you got a lot of Yahoo! content, including a free Yahoo! premium email address. MS having control over the four major elements:
1. OS that runs the Browser
2. Browser that connects to the Internet
3. Initial portal you see when you connect & default browser markup / default email
4. Email
5. Search and Ads

This starts to feel like a horizontal monopoly. I'm not sure it is one - but it has much more potential to be one than Google, which up to now has stayed entirely in the 4. and 5. group.

The interesting concern I'd have is, is this the first step towards Google and MS controlling the ISP market? Google I think has actually taken some initial steps, so perhaps this is not the first one, but if MS is able to leverage Yahoo! to a more substantial connection to AT&T (if that connection still exists) that could push Google to do the same thing (either with Comcast/Verizon/some other major ISP, or to start providing it on their own), this could happen relatively quickly.

I'm not sure if this would be a good or a bad thing - particularly if one or both start providing their own competing service this could be a very good thing, as the current market is way too overpriced; the default (non-promo) prices in the $40+ a month are just silly for anything over 1MBPS.

[Asher]

This starts to feel like a horizontal monopoly. I'm not sure it is one - but it has much more potential to be one than Google, which up to now has stayed entirely in the 4. and 5. group.

You don't think a massive amount of people have Google as their homepage?

You also need to look past the obvious: Google has lots of agreements and employees working on Firefox code as well, and is developing OSes themselves. They're not there yet, but they're a young ambitious company.

[snoopy369]

Originally posted by Asher

Microsoft has been judged in a court of law to be a monopoly

Not in this market.

Why are you so scared about this transaction, Dan? It's like you're in preemptive damage control.

And the "monopoly" MS was convicted in wasn't the "internet apps" space, the monopoly was in the "operating systems" space...

Internet Explorer was the primary element they were being investigated for, wasn't it? The integration with Windows, certainly, but it was Netscape that triggered the investigation. (Java was another, I think, but that's not as related).

[snoopy369]

Originally posted by Asher

This starts to feel like a horizontal monopoly. I'm not sure it is one - but it has much more potential to be one than Google, which up to now has stayed entirely in the 4. and 5. group.

You don't think a massive amount of people have Google as their homepage?

You also need to look past the obvious: Google has lots of agreements and employees working on Firefox code as well, and is developing OSes themselves. They're not there yet, but they're a young ambitious company.

Google is not the default for a major ISP, however, which is a difference between monopoly and just successful company. I certainly don't think it's enough by itself - and I probably would pass the merger with no qualms, although I think it's better for competition for all three to exist, I don't think it's adequately harmful to block - but it is one element they could look at.

Google certainly has monopolistic potential as well, and I'm honestly somewhat surprised the doubleclick merger went through; but the fact that MS has Windows and IE is a significant element and cannot be ignored.

[Asher]

Originally posted by snoopy369
Google is not the default for a major ISP, however, which is a difference between monopoly and just successful company.

Google is the default homepage and search provider for Firefox, which is now up at the 20% marketshare level and rising -- presumably higher US-wide than whatever AT&T has for internet.

Google certainly has monopolistic potential as well, and I'm honestly somewhat surprised the doubleclick merger went through; but the fact that MS has Windows and IE is a significant element and cannot be ignored.

I think it's very, very wrong to link the ad serving business with the desktop PC business, as they're unrelated.

[DanS]

Originally posted by Asher

Microsoft has been judged in a court of law to be a monopoly

Not in this market.

The law disallows using monopoly power in one market to compete unfairly in adjacent markets.

[Asher]

Originally posted by snoopy369


Internet Explorer was the primary element they were being investigated for, wasn't it? The integration with Windows, certainly, but it was Netscape that triggered the investigation. (Java was another, I think, but that's not as related).

But it was the monopoly in the desktop OS. That's a hugely important distinction, the legal monopoly was in Windows and not in Internet Explorer.

And Windows has no bearing at all on the internet ad business.

[Asher]

Originally posted by DanS


The law disallows using monopoly power in one market to compete unfairly in adjacent markets.

And how is Microsoft using its desktop PC monopoly to compete in the internet ad market?

If anything isn't Google's effective monopoly in the search business being leveraged to get into the ad vending business? That's a far more apt comparison than Windows an ad market.

[DanS]

Even if so, Google hasn't been proven to be a monopoly in a court of law. Microsoft has. Remember the unresponsive and surly Bill Gates testimony? There are practical implications to this distinction.

[Asher]

Originally posted by DanS
Even if so, Google hasn't been proven to be a monopoly in a court of law. Microsoft has.

You know better than this, Dan. Because Microsoft has a legal monopoly in a legally and practically separate business has no bearing on them acquiring companies in other aspects of business.