May 7, 2007 4:01 AM PDT

Keeping up with the (Dow) Joneses

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It wasn't the first time reports of discussions between Microsoft and Yahoo surfaced: the Journal reported it a year earlier, also on the eve of Microsoft's Strategic Account Summit, an annual event for online advertisers being held this week. (Yahoo CEO Terry Semel is speaking Wednesday at the Microsoft event in Redmond, Wash.) And it may not be the last given the difficulty the companies are each facing as they attempt to narrow the gap with Google on its $10 billion-a-year search advertising business.

Industry experts noted that Microsoft buying Yahoo might be a stretch, given that one of the biggest obstacles to any acquisition is Microsoft's historical reluctance to make big acquisitions. As a result, the company has lost out on a number of deals in recent years only to see them go to Google. Google's acquisition of DoubleClick is one example of that, its advertising partnership with AOL another.

There's no question Yahoo and Microsoft are losing ground to Google. The search king has 32 percent of the U.S. online advertising revenue, compared with Yahoo's 18.7 percent and MSN's 6.8 percent, according to researcher eMarketer. Google has more than 75 percent of the paid search ad spending in the U.S., compared with Yahoo's 16 percent, the firm said. As far as share of searches in the U.S., Google has more than half to Yahoo's 22 percent share and Microsoft's 10 percent, according to Nielsen/NetRatings.

"Yahoo is at one of the many crossroads in its history right now, trying mightily to compete with Google," Parr said. But "I'm not sure being part of Microsoft is necessarily the right path for Yahoo to be solving its problems."

Meanwhile, Microsoft's efforts to compete with Google on consumer Internet-based services, rebranding MSN services as "Live," for instance, have foundered, and its efforts in search and the keyword advertising market, with its new AdCenter system, have failed to gain traction.

A combined Yahoo and Microsoft would be a powerhouse in display advertising and audience, but Yahoo would see limited benefit, relatively, and Microsoft would most likely struggle dealing with an additional Yahoo brand, said Charlene Li, an analyst at Forrester. "I believe that a merger won't be in the works anytime soon," she wrote in a blog posting. "More logical would be partnership agreements where the strengths of each company are shared."

But a Microsoft-Yahoo combo could backfire, Foundation Capital's Moldow said. "In the end I don't think you can merge assets and create organic growth," he said. "You don't get a pure breed by breeding two mutts, not that I'm calling MSN and Yahoo mutts."

CNET News.com's Ina Fried and Dawn Kawamoto contributed to this report.

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5 comments

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I use Yahoo for my portal and email
If MS buys them I will dump them immediately. I have never seen anything good come out of Redmond.

As for all these mergers and buy outs, this is just typical of what the U.S. has become. Fake money creating fake capital creating fake wealth. I love the headlines touting the Dow's "record highs". What a sham.

Read the truth about the U.S. economy for yourself.

<a class="jive-link-external" href="http://www.financialsense.com/fsu/editorials/2007/0416.html" target="_newWindow">http://www.financialsense.com/fsu/editorials/2007/0416.html</a>
<a class="jive-link-external" href="http://www.informationclearinghouse.info/article17627.htm" target="_newWindow">http://www.informationclearinghouse.info/article17627.htm</a>
Posted by expatincebu (156 comments )
Reply Link Flag
yep, fake - paper money
Yep, I agree, we have all been through this in 2000, remember
the .dot .com bust ? that was only like 7 years ago ?

Does anyone remember ?

I bought a Condo in Everett, WA for $100K 3 years ago, I just
sold it for $190,000 in 4 days I got an offer. Homes are going
up very slowly but anything that has the label Condo on it, very
fast.

While maybe not in the next 3-6 months, I forsee a bubble, so
might as well move the paper profit into a real profit, pay off all
my debt and rent for the next year and see how the market for
homes does.

Microsoft does make crappy products, with their crappy
behavior not just to the outside world but internally towards
their employees. MS employs a lot of Vendors, what they refer
to as v-dash trash, I have worked there, not any more, have
many friends that work there both v-dash and blue badges and
they all hate their inability to humainly behave.

I used to use hotmail before MS got them, then I switched to
yahoo after they got bought out, I already forsee MS buying
yahoo, so I already got out and switched to gmail.com

And if that fails, there is plently of smaller mom and pop
operators that can manage a Mail Exchanger very well and as
long as I get my email, who cares. I already wrote off hotmail
and aol as well and their live BS push.
Posted by RompStar_420 (772 comments )
Link Flag
Boggles the Mind
It appears we'll see more of this activity in coming months, as audiences consolidate and slower growth entities realize they need to add properties that are positioned for growth in the future.

<a class="jive-link-external" href="http://brain.com" target="_newWindow">http://brain.com</a>
Posted by azareus (31 comments )
Reply Link Flag
Microsoft-Yahoo Cooperation
Here's what I would do if I were an executive working for Microsoft or Yahoo: First of all, merging the two corporations is dumb. Both companies overlap considerably for many services, and merging them would stifle competition and maybe even give Google a bigger advantage in innovation. So Microsoft should not buyout Yahoo right now. The best way would be for Microsoft to invest in Yahoo, and for Yahoo to invest in Microsoft. For example, Microsoft could buy 30 percent of Yahoo stock, or 40 percent. Yahoo can do the same, with buying a percentage of Microsoft stock, like 30 percent too. This way, both corporations' future are strongly tied together. Yahoo and Microsoft shareholders would have intertwined visions and goals. Two heads are better than one. If for some reason, in the future, you two want to go separate ways, then just sell off your stocks.

Microsoft has its strengths in their operating system and office/productivity applications. Those are mainly two cash cows among many others. Google is trying to force its way into the market for office applications by offering free usage over the Internet. The "free" part is misleading; Google will probably pay for the expenses of the office applications through ads. So the best thing for Microsoft to establish an early lead in this market and to eventually dominate the market is to offer "Microsoft Office Live" over the Internet FOR "FREE." Make a deal with Yahoo to put Microsoft Word, Microsoft Excel, and Microsoft PowerPoint on the Yahoo homepage. Of course, these online apps would be on the MSN homepage too. Display ads to get revenues out of this, I would use the similar system that Google uses for Google Gmail. They scan the words that are in emails that people write, and then use that consumer data to display the relevant ads. I would guarantee user privacy by promising to only words and not link the words to any personal data. Such as, label people as numbers and letters, and NOT their real personal names. Or maybe guarantee that the info won't be sold or given out.

Now for the search engines, Microsoft and Yahoo should definitely combine their efforts to develop a better and more accurate search engine that gives results that people want. Do not combine your homepages; leave MSN and Yahoo homepages separate. Maybe do a little bit of combining News websites of MSN and Yahoo, or Autos websites like Yahoo Autos and MSN Autos/Cars. But it's better to leave your respective brands and brand names intact (like MSN and Yahoo properties should stay separate). The only thing that you guys should do is to start a combined effort by Yahoo and Microsoft engineers to develop and improve your search engines. I personally think Yahoo and MSN have good search engines, but just not as good as Google. I would rank them from best to worst, 1) Google, 2) Yahoo, 3) MSN. So MSN maybe should work out a deal with Yahoo to use Yahoo's search engine technology AND to work on a joint project to improve and create a new search engine that both MSN and Yahoo can use. Yahoo and MSN should develop and or improve the advertiser programs for people who want to advertise on the Internet, especially on MSN and Yahoo properties. These things are ideal for Microsoft-Yahoo cooperation in order to compete with Google.

If you do these things, you'll be able to smash Google or at least put Google under pressure. To summarize what Microsoft and Yahoo should do: 1) Do not merge together but maybe both invest in each other, 2) Offer Microsoft Office Live for free over the Internet, 3) Work together on search engine and web/search advertising.
Posted by Millerboy (104 comments )
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