TOKYO/SHANGHAI A successful Microsoft Corp
(MSFT.O) bid for Yahoo Inc (YHOO.O) could slow the growth of
their common rival, Google Inc (GOOG.O), in Asia, where the
world's biggest search engine still lags local players.
For Microsoft, whose MSN portal has been struggling to gain
share in Asia, the deal worth around $41 billion would open up
opportunities to cooperate with top Chinese e-commerce firm
Alibaba.com Ltd 1688.HK and Japan's top search engine, Yahoo
Yahoo and Microsoft are at a stand-off after Yahoo's board
rejected Microsoft's unsolicited offer of $31 cash or shares,
saying it undervalued the company.
If the deal goes through, Microsoft stands to gain a leg up
over Google from cooperation with Alibaba's online software and
Yahoo Japan's online customer base. Yahoo owns 39 percent of
Alibaba.com's parent, and a third of Yahoo Japan.
"If I were Google, I would be looking for acquisitions or
more tie-ups in Asia to help secure better market share," said
Hiroshi Naya, analyst at Tokyo-based Ichiyoshi Research
In Japan, Google is outnumbered nearly three-to-two in
users by Yahoo Japan, according to Nielsen Online, and it comes
a distant second to Baidu.com Inc's (BIDU.O) near two-thirds
share of the search market in China.
Analysts say the big "if" for a merged Microsoft-Yahoo
hoping to keep Google from the No.1 spot will be whether
Microsoft can learn from Yahoo and adapt to local markets with
their language and cultural barriers, to expand the merged
company in Asia.
"The main concern is whether or not Microsoft would respect
Yahoo Japan's unique culture, or if it will muscle its way into
what Yahoo Japan has achieved here," said an official at
Japanese mobile phone operator Softbank Corp (9984.T), who
asked to remain anonymous.
Softbank owns 41 percent of Yahoo Japan, a 3.9 percent
stake in Yahoo Inc and a 33 percent stake in Alibaba Group.
Rivals agree even successful domestic brands need to be
modified to work in other countries or regions, particularly in
Asia where language and cultural barriers are more pronounced.
"Business models need to be changed, adapted to fit local
needs," said Baidu Chief Executive Robin Li.
"The details matter, and they take time to iron out," he
said on the sidelines of a conference to launch the search
engine in Japan in January.
Thanks to their early entries, Yahoo Japan and Alibaba have
already cultivated strong ties with local users.
Besides leveraging their dominance in Asian Web markets,
Microsoft may also be able to link up with Alibaba on
advertising and online trading with the Chinese company's large
customer base, said Liu Bin, analyst at Beijing-based research
"The most likely possibility would be to use the MSN
platform and MSN Live for marketing promotions for Alibaba," he
Alibaba's software venture, Alisoft, also offers online
software for documents and spreadsheets which can be used over
the Internet without having to download PC-based software like
This would counter Google's popular Web-based applications,
and would give Microsoft a much-needed boost in the online
software area where it is seen lacking.
But such synergies could end up as pipe dreams if China's
government fears Microsoft will take control of Alibaba and
sets conditions for the stake transfer, such as limiting the
number of foreigners on the board.
And while Yahoo Japan and Alibaba are entrenched in their
home markets, that does not mean their approaches will work as
newcomers in other Asian markets.
Yahoo Japan, which also provides broadband Internet
services, might find it hard to replicate its model across Asia
as it seeks synergies with its telecoms business, while
Alibaba's business model caters to manufacturers in China,
"It's not necessarily the same dynamic outside China. They
won't really have that scale that's reinforcing them now in
China," said Claus Mortensen, analyst at IDC's Asia/Pacific
Emerging Technologies Research.
Microsoft's cash and pool of researchers, however, are huge
attractions for cash-strapped Softbank and Yahoo Japan seeking
to cement the dominant position Yahoo Japan holds.
While wary of Microsoft control in locally-managed
businesses, Yahoo Japan could take advantage of Microsoft's
scale to lower marketing costs and help it tap Microsoft's
resources to make searches faster.
But Google is unlikely to remain standing and could use the
distraction of a drawnout battle between Microsoft and Yahoo to
steal a march on its rivals.
It has already been developing tie-ups in Asia, including
those with Japan's two biggest mobile phone carriers, NTT
DoCoMo Inc (9437.T) and KDDI Corp (9433.T).
Google has also bought stakes in Chinese Internet firms
including downloading service Xunlei Networking and social
networking site Tianya.cn, and has a partnership with Web
portal Sina (SINA.O).
Analysts believe Japanese social networking site Mixi Inc
(2121.T) and online marketing firms, could also be in Google's
"Google is a worthy competitor. The common threat is
Google. I say that with respect," Softbank President Masayoshi
Son said last month.
(Editing by Lincoln Feast)