Yahoo To Buy Inktomi
from the sorry-Google dept
In a slightly surprising move, Yahoo has acquired Inktomi for not very much money. Inktomi, of course, used to provide search services for Yahoo, but lost that contract to Google a few years ago. It would seem that this deal would put Google's Yahoo relationship at risk as well. Of course, if Yahoo did ditch Google for Inktomi, it would be a mistake, since Inktomi's search is much weaker than Google's, and users might revolt. Now, the final purchase price is $235 million, but just three months ago, Inktomi was forced to purchase the building they are housed in (though, it's mostly empty) for over $100 million - so I wonder how that gets sorted out in the deal. Inktomi, also has two (very nice looking) buildings down the street from me, that they built in the past two years that are completely unoccupied. I'm sure Yahoo will help them get out of that lease, as wel, but I wonder how much of the purchase price goes to that.
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Two reasons
1) Google is expanding their array of services and is already encroaching on Yahoo's territory with Google News and Froogle. It doesn't make sense to outsource your search services to your competitor.
2) Search is extremely profitable, as Overture and Google have demonstrated. Yahoo wants to increase its share of the market before Google completely dominates the area.
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Anyway, I still think Yahoo shouldn't look at Google as a competitor, and they should have moved their business on to a different area already, but it seems they do look at Google as a competitor, which explains why they made this very silly purchase of Inktomi, which will be considered a huge failure.
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