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It's Down to Two: Microsoft and Google; If it goes through, Redmond's bid for Yahoo! will reshape the battle for online ad market share
Author: Jeffrey F. Rayport
Date: 4 February 2008
Source: BusinessWeek.com

If Microsoft's $44 billion acquisition of Yahoo! looks like a big business story, it is -- but not necessarily for the reasons you've been reading about these past few days. Yes, it's a Big Gulp of a deal that will pay a 60%-plus premium on the share price. And yes, it's a transaction that marries two high-profile brands of the technology world.
If the Microsoft-Yahoo deal is consummated, what seemed increasingly to be Google vs. Everyone Else on the Web will become simply Google (GOOG) vs. Microsoft (MSFT). As a standalone brand, AOL won't be around for long, and the list of major online players drops off sharply after that. Without consolidation of massive proportions among the remaining giants of the online world, no one company has a chance at catching Google in the race for online ad dollars -- unless Google were to develop a bad case of "Big Company Disease" and derail its own momentum.
The new online reality is that scale and features attract online users and the advertisers who want to reach them, and analytics -- the tools that help sites target ads to users more effectively -- build ad-pricing power and therefore margin. Scale is simply the traffic or number of unique visitors a site attracts. Features are the applications and services a particular Web site can deliver. In both cases, more is usually better. But analytics is an area that looks like art but is rapidly becoming science. It's the way sites parse users' profiles and click streams using behavioural targeting, predictive intelligence, and other database manipulations to boost ROI metrics for marketers spending advertising dollars online.
Google has it all: scale [more unique users than any other online site], an endlessly expanding array of features [tools and applications...