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27 February 2024

UAE should back Gates on Yahoo

By Frank Kane

There is a battle going on for the future of the world’s internet business. It will be fought out in the Silicon Valley of California and in the financial power-houses of New York, but the Gulf countries should watch the situation closely – it could play a decisive role in the outcome, and advance its own position as a global internet centre.


The battle is nominally between Microsoft and Google over ownership of Yahoo. Bill Gates’ company – the dominant force in the global software business, which has been at the forefront of innovation and progress in the computing industry – is bidding some $43 billion (Dh157.8bn) to acquire Yahoo, the ailing search engine company. Though the takeover announcement contained the usual platitudes about synergies and economies of scale, the real motive from Microsoft’s view is that it puts up a viable competitor to Google, whose search engine dominates the industry.


Allegations of monopolism are flying from all sides. Microsoft says its deal would at last provide real competition to the dominant Google; in its counterattack, Google claims Microsoft-Yahoo would have an overwhelmingly monopolistic position in the business.

Google has proposed a compromise solution that it hopes will prove more acceptable to the regulators than a complete Microsoft acquisition. It wants to take over Yahoo’s search engine businesses and then run them as an outsourced operation. This would make financial sense for cash-strapped Yahoo, adding some 25 per cent to earnings from the extra advertising business a Google link-up would pull in.


That is logical in the context of a takeover defence, but not from an industrial point of view. Yahoo search is struggling precisely because Google dominates the market – handing it over to the market leader does nothing to enhance competition or services.

Other Yahoo assets include its business in the Far East, where the company had big growth ambitions, but a mixed track record – in Japan and China. However, if the big Californian companies are aware of the Asian potential, they have yet to catch on to the Middle East market, and this is where the Gulf states could play a decisive role in the battle and enhance their own internet infrastructure at the same time.


The Middle East came to the internet revolution rather late in comparison with the rest of the world. Overall usage of the web in the region amounts to some 17.4 per cent of the population, compared to a world average of 20.1 per cent. The United States is by far the biggest, both in absolute and proportional terms – nearly 70 per cent of Americans, some 211 million people, regularly use the internet.


But the Gulf has been catching up quick. The rate of growth between 2000-2007 was 920 per cent, and a lot of this was in the UAE – at 38 per cent, the UAE has the biggest proportion of its people in regular internet usage.


Bill Gates already has close links with the Emirates, as witnessed by his recent visit; Microsoft has a major presence in Dubai. UAE business should back Microsoft in the coming battle – with financial muscle if necessary. Microsoft is planning to borrow money for its Yahoo bid, for the first time in its 31-year history, and a strategic investment by the UAE sovereign wealth funds would be an appropriate declaration of loyalty towards Microsoft, and an apt statement that the country wants to be the regional centre for the internet business.