Well, the buzz in the blogosphere is Microsoft’s unsolicited bid for Yahoo!

It seems most every year this rumor circulates the internet, but after Yahoo’s disastrous earning report last week, virtually everyone expected there to be an offer made for the internet pioneer.

So, when the previous years’ rumor turned out to be this year’s truth, no one really batted an eye.

The question/discussion was more centered around: Does such a merger/acquisition make sense (for MS, Yahoo, and/or end users)? And what will be the result of such a merger? (Will Flickr remain; will hotmail merge with Yahoo mail and so on).

I was going to write yesterday, but I was sick (still am; damn flu), but here are my initial, high-level impressions of the potential merger:

• This is a move – on both company’s parts – to counter Google. Yet will the sum of the parts actually get them even close to Google? I dunno. The No. 2 & No. 3 video rental companies (Hollywood and Movie Gallery) in the U.S. merged to try to get traction against No. 1 (Blockbuster). Since that time, the merged No. 2 retailer is busy closing stores and selling off assets. Not exactly a success story (to be fair, Blockbuster is stumbling, as well).
• This is a very clear admission by Microsoft that – despite its deep war chest – it has no frickin’ clue on how to leverage search, content and advertising online. That it is, for the most part, completely lost once it leaves the desktop. (The one exception to this is Xbox Live, which has gotten great reviews and makes Sony’s PS3 online component look like Windows 3.11 over a 2400 baud modem.)
• How can two such different companies successfully combine? Jeff Jarvis argues that Yahoo is the last old media company, and MS is the last old technology company (Microsoft-Yahoo: The Deal of the Dinos Great title). And the combined companies still won’t beat Google.
• At the same time, the two companies have so much in common, and the common areas are the arenas in which both are attempting to battle Google: The internet space (i.e. forget, for the moment, MS and Windows). Yahoo Mail, Hotmail. Both have search. Both have online ad platforms (which is what most of this merger is about). Both have made forays (usually via investment/purchase) of social networking sites. What gets cut when the merger is complete? You don’t need two email systems; two ad platforms. Lots of overlap, and that’s not even counting logistics: You don’t need two accounts payable divisions, for example, in one company. There will be cuts. (Update: Nice overview of competing products MS/Yahoo will have to merge/live with/kill.)
• This smacks of the Netscape/AOL merger, as well as the AOL/Time-Warner buyout. Those worked out well, didn’t they??

On the other hand, despite the negative comments I’ve outlined above, I think the merger sorta makes sense. Why?

• Well, Yahoo! really doesn’t have a choice. They are going to be acquired by someone. The writing’s on the wall. MS might not be the best choice, but it does generate buzz (which can help) and now that MS is run by Ray Ozzie, we might see some internet-smart changes.
• Both companies understand the common enemy: Google. If, for example, a private equity group acquired Yahoo! (another persistent rumor), it might have led Yahoo! (wisely or not) away from its interet focus.
• This merger, of course, is about money. Eyeballs and advertising. Yahoo! has the audience and internet chops; MS sure knows how to leverage almost anything to make a buck – and they have bucks to throw at products. It has potential.

If this comes to pass, will the combined companies be a greater threat to Google than each was separately?

Nah.

Google is open, distributed and insanely focused on the web (Android is an internet play; trust me). Yahoo! has the Terry Semel baggage of content; MS has its roots – and primary revenue stream – in desktop apps. Especially with MS, don’t expect the company to abandon its roots and insanely profitable products, even if the company does continue to profit on the present at the expense of the future.

Bottom line: Merger or not, Google wins. Whatever the hell that means…