by Li Mi

    BEIJING, Feb. 3 (Xinhua) -- Microsoft on Friday courted Yahoo with a 44.6-billion-U.S.-dollar merger offer, or 31 dollars per share.

    It came after almost a year of debate and the realization that neither firm can take on the giant that is Google. Assuming the merger goes ahead, the Microsoft-Yahoo marriage looks far from being a bed of roses capable of taking on Google and reshaping cyberspace.

Microsoft on Friday courted Yahoo with a 44.6-billion-U.S.-dollar merger offer, or 31 dollars per share.(Xinhua/Reuters Photo) Photo Gallery>>>

    The online advertising market that Microsoft has been pursuing for years is one of the key goals of the takeover. In his letter to Yahoo's board of directors, Microsoft CEO Steve Ballmer touted "significant benefits of scale in advertising platform economics" as one of the key advantages of the acquisition.

    Currently, Google is widely seen to be the technology and market leader in online advertising. According to estimates by Market space Advisory, a U.S. strategy consulting firm, 42 percent of online advertising business is dominated by Google while Microsoft, Yahoo, and Time Warner's AOL combined have about the same percentage of the market.

    From a market point of view, the merger would help Microsoft and Yahoo compete with Google, and online advertisers obviously would like to see more competition in the market. However, there are still several hurdles to clear for the two to reshape the Internet world.

    Firstly, both Yahoo and Microsoft are lacking an online advertising platform to take on Google's AdWords, which enables all advertisers, regardless of the scale of their business, to purchase highly targeted advertisements across a wide range of participating sites. AdWords also provides advertisers with data on how their advertisements are performing.

    Secondly, the current online advertising market is still search-based. Neither Yahoo nor Microsoft could come close to Google in this field. Google is estimated to have a 58-percent share of the web search market while Yahoo has a 23-percent market share and Microsoft only 10 percent.

The Yahoo headquarters in Sunnyvale, California.(Xinhua/AFP Photo) Photo Gallery>>>

    Thirdly, the size of Microsoft and Yahoo's network for online advertisement distribution is yet to be compared with Google's, although the two have poured large amounts of money into acquisitions to build a competitive one.

    The only area that Microsoft and Yahoo could lead after their merger is in the market for display advertisements, or banner advertisements. Display advertisements refer to those small rectangular advertisements that appear on web pages and that take users to the advertiser's web site with one click.

    It is estimated that the two companies could have a 30-percent market share of banner advertisements, outshining Google's two percent. However, this advantage may not last long, after the U.S. Federal Trade Commission approved Google's takeover of online advertising company DoubleClick.

    Even with the challenges, many analysts still see a positive change after the merger of the two companies, believing that a combined company might be able to reshape the way in which the PC desktop connects to the Internet. Since 90 percent of the world's PCs use Microsoft's Windows operation systems, the vast amounts ofdata from Internet such as weather forecasts and stock prices could be automatically plugged-in.

    Threatened by Google's efforts to develop free web-based Office software, Microsoft could also use Yahoo's online forces to innovate web-based versions of its classic software platforms, such as Word and Excel.

    And last but not least, one key charm of the Internet industry is its speed in bringing forth innovation. Compared with Google, both Microsoft and Yahoo have been criticized as stagnant in this regard.

    Yahoo used to be yesterday's Google, but was quickly beset by the emergence of eBay and Google, not to mention the new generation of YouTube, Facebook and MySpace, whose market value could exceed Yahoo's within just a few years. At this point, it is therefore difficult for the market to choose a winner.