As Yahoo perseveres in resisting Microsoft’s unwelcome takeover advances, the debate over whether, and by how much, the software giant will need to increase its $31-per-share bid is reaching fever pitch. But few Wall Street analysts doubt the software company will ultimately prevail.
Assuming those prognostications prove correct, the discussion will swiftly turn to what a blended Microsoft-Yahoo would look like, and what Microsoft will need to do to justify a likely $40 billion-plus sale price.
Post-Acquisition Musts
After some initial cost cutting, the enlarged company will presumably try to gussy up Microsoft’s product offerings to flog to Yahoo’s user base. This could be a problematic upsell, as the average Yahoo user is not used to paying for anything.
The real post-acquisition gain will hinge on how well the new company can forge relationships with customers, based on the information people share online and how they use the “Microhoo” lineup of products and services. This will require some new thinking from Microsoft, a company that makes most of its money from dealing with license holders — not consumers who use its products for free.
The company will have to continue managing personal software licensing but also establish longtime intimacy with customers. Combining the two strategies will require Microsoft to become what’s known as an identity management company. These companies create, maintain, disseminate, and even dispose of our online personas. Think of them as the unseen, unappreciated, and often unpaid service staff of the digital world, responsible for authenticating digital credentials, managing the mail, maintaining the switchboard for VoIP [Voice-over-Internet Protocol] calls, and acting as the universal directory for online search.
Here’s the rub: As the blended companies merge databases and assume this role, they will gain an unprecedented amount of insight into consumers’ online behavior and buying habits. What we do will be correlated to what…