Think today was going to be a boring day? Think again! Microsoft has made an unsolicited cash and stock bid for Yahoo! totaling $44.6 billion dollars. This deal represents a premium of 62% from Yahoo’s Thursday closing price. Microsoft stated that Yahoo! shareholders could elect to receive either cash or a fixed number of shares of Microsoft common stock. The offer consists of one half cash and one half Microsoft common stock.

If this deal goes through, it would definitely change the landscape of the Internet industry. For many years, we’ve been accustomed to the notion of the big three in Internet search – Google, Yahoo!, and Microsoft with MSN. Over the last 3-4 years, Google has risen to the top primarily through the Internet ad industry thanks to paid search and their contextual ad service. In the meantime, Yahoo! (which ironically had the technology lead in paid search thanks to it’s purchase of Overture.com) and Microsoft both struggled to keep pace with Google.

In 2007, we saw additional consolidation in the Internet ad industry as several ad companies were snatched up by Google and Microsoft. While one could certainly see this as an opportunity for Microsoft to consolidate the Internet portal space, it really is more about the Internet ad space. Together, Yahoo! and Microsoft could easily create a force to be reckon with in the ad space – making life just a bit tougher for Google (which also disappointed analysts this past quarter).

It looks like 2008 will certainly be an interesting year in the Internet space.

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