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Rediff News  All News  » Business » How MSN-Yahoo! combo may affect India

How MSN-Yahoo! combo may affect India

February 02, 2008 04:16 IST

If Microsoft's bid for Yahoo! goes through, the combination will mean stiff competition for Google and AOL in the Rs 230 crore online advertising market in India that is growing rapidly.

Yahoo! has about 1,500 people in India across its R&D and sales operations, while AOL has a development, test centre, offshore analytics team and content division located here. Indian player too has been entrenched here for over a decade.

The acquisition will create a formidable competition to Google, in India and globally, said Alok Shende, head (IT & telecom), Ovum India. "It will strike at the very heart of Google's success -- the search-based advertisement model. It is also going to trigger a wave of consolidation at both the global and regional market levels."

Microsoft already has a messaging (for IMs) pact with Yahoo! in India and it will build on this relationship to compete with Google here. Google, the internet search giant which leads the pack in India also, had poached the Yahoo! India R&D chief and made him chief technology officer of its India R&D unit. Yahoo! India has lost three India heads in five years.

Pradeep Udhas, executive director, KPMG, said, "If the deal does come through it will create a giant, which will mean better service offerings for India. There is no foreseeable negative impact for India and it will only be for the better. Microsoft has a bigger presence in India so the deal could mean more work being transferred over to Yahoo!"

Analysts say that since Yahoo! India R&D focuses on rolling out products for emerging markets, it will play a vital role in the new equation.

"This may also provide opportunities to outsource more works to India, China and other emerging countries, as both Yahoo! and Microsoft have significant R&D presence in India," said S Sabyasachi, director, neoIT, a services globalisation consulting firm.

Avinash Vashishta, CEO and MD, Tholons, believes that from "an Indian perspective, the effect of Microsoft's bid to buy Yahoo! is neutral with no large impact. Microsoft has a definite dominance in India, and such a move will strengthen its position in the internet search space and will make it a stronger competitor for Google."

Andrew Frank, research vice-president, Gartner, was skeptical, saying, "Although the synergies between the two companies, which Microsoft asserts are worth at least $1 billion a year, are certainly great, the merger raises the question of how effectively they'll be able to continue operating during their integration. The online advertising business requires significant levels of account service and even the perception of a diversion could wind up delivering business to their competitors. Anti-trust laws are also a concern with any deal of this size."