Brand Identities After a Microsoft and Yahoo Deal

By Ericka Chickowski  |  Posted 2008-02-08 Print this article Print

Microsoft has long been known for acquiring companies and converting them in to Microsoft-branded products. Should a deal transpire, can Microsoft really do the same thing with a web-only brand as well-known as Yahoo? Baseline takes a deep dive in to the effect branding might have in this deal and after one.

There are a ton of questions surrounding the proposed Microsoft acquisition of Yahoo, even with Yahoo's latest rejection of Microsoft's initial bid. Top of mind for marketing experts, and consumers alike, is how Microsoft would handle the Yahoo brand if and when it falls under Microsoft’s ownership umbrella.

The evaluation of a brand’s strength in the market has always been a delicate art where analysts use a variety of earnings metrics, audience statistics and analysis of intangibles to attach a dollar value to a given brand.

Known as one of the top brand management consultancies in the world, Interbrand Corporation has ranked global brands by doing just that for the past ten years. Both Microsoft and Yahoo have consistently found themselves on top of the Interbrand annual brand ranking list. Last year, Microsoft garnered a second place spot just behind Coca-Cola, and Yahoo was brand number 55. Interbrand believes that Microsoft’s brand image holds a value of $58.7 billion and Yahoo’s is worth $6 billion.

Similarly, UK-based brand consultancy Millward Brown Optimor also ranks the top 100 global brands based on its assessment of their financial value. Last year the firm put Microsoft in third place, estimating its worth at $54.9 billion, while placing Yahoo in 42nd place with an estimated brand value of $13 billion.

A collision of such big Internet identities is sure to spark controversy when it comes to integrating each together. Microsoft has kept mum about how it will position Yahoo if the deal goes through, leading many to wonder what will happen to one of the strongest and longest-lasting on the Internet.

“I think certainly the issue of which brand will win is a bit of a challenge,” said Ronald Schmelzer, managing partner for ZapThink. “It would have been better if Yahoo filled obvious gaps that Microsoft didn't have, but given that there is a Microsoft analog to pretty much all of the things they're acquiring and Microsoft has not put forward a plan, I think for many Yahoo users it’s a big question mark.”

According to David Mitchell Smith of Gartner, the most likely scenario will be that even if Microsoft tries to streamline technology and processes between its online brands such as MSN and Microsoft Live, it will keep the Yahoo brand intact to leverage it for its strengths. Because even though Microsoft’s overall brand is stronger than Yahoo’s, its online brands suffer from a bit of identity crisis, Smith says.

“I would expect to see more of an emphasis on the Yahoo brand over time,” said Smith, an analyst for Gartner’s web services division. “Yahoo is one of the original brands of the web, it’s a pure web brand and I think it stands for something.  The users are pretty happy, they don't go there necessarily for the latest and greatest of everything, but what's there works well. MSN on the other hand has been around for along time and has meant a lot of different things to different people over the years, so it’s hard to say exactly what it stands for.”

The analysts at IDC research echoed similar sentiments in a Feb. 1 report released on the heels of Microsoft’s announcement last week.

In acquiring Yahoo!, Microsoft would buy a very strong brand, and we would expect that they support and nurture it,” the report said.  “For a long time, Yahoo! was seen as an important online alternative to Microsoft (the "anti-Microsoft") by many consumers. Things are no longer so black and white, but some users may continue to harbor similar feelings. Retaining the Yahoo! brand would be an important step toward keeping these long-time users.”

Keeping Yahoo users happy will likely be a big priority for Microsoft if the acquisition does go through, as their eyeballs will be instrumental in helping Microsoft credibly compete against Google’s online supremecy, particularly in the search and advertising markets. Currently Google reigns in first place on both counts, with Yahoo and then Microsoft trailing in second and third.

According to IDC, the acquisition wouldn’t vault Microsoft into first place, but it would definitely close the gap. Analysts with the firm say that Google’s Internet audience reach of 80 percent would only be slightly higher than the combined Microsoft-Yahoo businesses, which currently total 73 percent of Internet users. Similarly, Yahoo and Microsoft’s combined 22.7 percent market share of the online advertising market would bring both much closer to Google’s 32.5 percent share.


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