Fight over Yahoo would limit online choices
After jockeying for the company is over, analysts say, the five largest Web portals are virtually certain to shrink to four -- maybe three.
The increased jockeying for Yahoo Inc. complicates the Web portal's takeover fight with Microsoft Corp. But it also simplifies the bigger picture: The five largest draws for the Internet audience are now virtually certain to shrink to four -- maybe even three.
The latest sign of the Web industry's maturation, Microsoft's unsolicited bid for Yahoo, is likely to result in less choice for advertisers and reduce competition for e-mail, Web search and other online services, analysts and consumer advocates said Thursday.
"I assume we're going to be losing at least one search engine," said Leslie Harris, president of the nonprofit Center for Democracy and Technology. "We're going to have a lot of power consolidated in a lot fewer places."
Bid for Yahoo: An article in Friday's Business section about consolidation among Internet giants said Capital Research & Management Co. had raised its stake in Yahoo Inc. to 10.1% as of March 31. Capital World Investors, one of the Los Angeles-based investment firm's two units, had done so. The other, Capital Research Global Investors, has reported owning 6.4% of Yahoo's shares as of Dec. 31.
Although Yahoo wants to remain independent, Microsoft's overtures have forced it to seek a merger with Time Warner Inc.'s AOL and a search-advertising deal with Google Inc. The Sunnyvale, Calif., company is seeking alternatives for investors.
Similar logic is fueling the deal-making ambitions of AOL, Rupert Murdoch's News Corp. and Microsoft, executives said Thursday.
Time Warner is trying to find a buyer for AOL. And News Corp. hopes to get a partner for its MySpace social networking site out of Yahoo's predicament: The media giant is talking with Yahoo about helping it avoid Microsoft, and with Microsoft about helping it swallow Yahoo, according to people familiar with the talks.
All the maneuvering shows how the Web, in its second decade, is growing increasingly susceptible to the same forces that shrink the leadership of other industries.
"You get too many players selling too many wares, and they compete on price and you end up consolidating," Sanford C. Bernstein analyst Charles Di Bona said. "So much for the Internet being completely different from everything else."
The prospect of diminished competition is raising concern on Capitol Hill, where the top members of both parties on the House Judiciary Committee pledged more hearings on competition in online advertising.
Investors and analysts said the most likely scenario remained Microsoft winning Yahoo, with the Internet giant's deal talks probably forcing Microsoft to raise its price. Microsoft's cash and stock offer was worth about $42 billion Thursday, when its shares rose 22 cents to $29.11 and Yahoo shares jumped 82 cents to $28.59.
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