Microsoft, News Corp, and Yahoo, Oh My

The armies of consolidation are on the march. Last week, Microsoft made a surprise $44 billion bid for Yahoo. Microsoft is desperately trying to shore up its exposed Internet flank, which Google is battering brutally. Snatching up Yahoo would go a long way toward putting Microsoft back in the online game.

Enter News Corporation. Rupert Murdoch is now reportedly offering a deal that allows Yahoo to remain mostly independent. He would trade Fox Interactive Media for a 20% stake in the new and improved Yahoo. FIM is significant property. It includes Myspace, Photobucket, games giants IGN and GameSpy,, and the MyFox internet platform for the News Corp-owned television station group.

I’m not sure which of these is better (or worse, to put a negative spin on it). Murdoch is, of course, pure evil. But his proposal would leave Yahoo independent and in control of some of the biggest destinations on the web. And all it would cost them is a 20% chunk of the company. Microsoft is a serial monopolist in its own right, and their deal would consume Yahoo whole. On the other hand, they aren’t Murdoch.

Ultimately the problem’s roots go back to the hyper-consolidation that has created an environment where all parties believe that they have to become gargantuan just to be able to compete and survive. In this matter, there don’t seem to be any good options.