Sam Gustin reckons that Google, for all its protestations, could actually benefit from a Yahoo-Microsoft merger. I’m more likely to take Google at its word, but Sam says that Google is playing a sophisticated game: trying to delay the merger in order to maximize the amount of time and effort that the companies spend merging as opposed to competing with Google. Once they’ve actually merged, he says, Google has little to fear and quite a lot to look forward to: there’s a very good chance that the two companies will spend years trying to mesh their disparate cultures, while Google goes on a tear and sews up all manner of fast-growing web-based opportunities.
I think it’s possible that we’re both right, or partly right: that it might make sense for Google to oppose the merger on straight-up, non-devious grounds while at the same time having every reason to believe that it could benefit were a merger to happen.
Here’s the scenario: Google is comfortable that it can compete effectively against Yahoo and Microsoft separately. It also thinks that a combined Microhoo would have such trouble consolidating and competing that Google could extend its current lead. But – and this is key – it sees what Microsoft sees: that buying Yahoo is Microsoft’s only opportunity to effectively compete with Google. Will the merged company be a competitive threat? Probably not. Might the merged company be a competitive threat? Yes.
Looked at this way, Google sees only one entity which can possibly compete with it: Microhoo. And it doesn’t want to take the risk that Microhoo will succeed, even if that risk is substantially less than 50%. So it opposes the deal. There’s a good chance that if the deal goes through, Google will benefit. But there’s a small chance that if the deal goes through, Google will be hurt. And so a risk-averse Google opposes the deal. Simple, really.