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Startup Survival in a Microsoft-Yahoo, Google World

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By Neetal Parekh on July 31, 2009 6:55 AM

On the heels of the ten-year web search and advertising partnership announced yesterday between Microsoft and Yahoo, in which Yahoo search will be powered by Microsoft Bing, many startups are looking for the take-away from this epic and seemingly one sided deal.  Small businesses, hoping to weather out the slowly-subsiding tides of the economy, and start-ups, eager to make a name and carve out a piece of market share, can look to what the deal says about the importance of search.

In a recent article in BusinessWeek, Silicon Valley Reporter founder Jason Calacanis looks at the Microsoft-Yahoo deal as a case study for startups.  He emphasizes Microsoft's move to invest heavily in revamping its search engine and to partner with the #2 in the search business is a telling sign that search is king. 

As a small business if there is a part of your business that has received attention or maybe even interest, it may be a resounding sign to invest more in it.  According to Calacanis, a company in that situation should buy up resources, smaller competitors, and new technology to develop it further--and not try to outsource that feature.  Drawing a parallel to Microsoft-Yahoo, a deal he finds lamentable, he would have counseled Yahoo to buy a handful of search-focused startups and plunge deeper into the algorithm-metrics of the game to ready itself for the next iteration of web search. 

Mergers and acquisitions are a fascinating field of both business and law---and this one doesn't pretend to be an exception.  In the course of many small business tenures there will be a temptation to fold, to merge, to cash out---whether it is best to do so requires a careful cost-benefit analysis by the business.  However, the Microsoft-Yahoo deal offers one current and tangible example of what a business may be giving up by stepping away from one of its crown jewels. 

Though the future is unwritten for what the deal will ultimately mean for Yahoo, Microsoft, and query superstar Google...at the end of the day, the answer seems to point to the search. 

 

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