Google's U.S. paid click-through rate posted a strong performance in the month of April, while Yahoo and Microsoft gave up ground, according to figures released late Wednesday by ComScore.
Google's paid click-through rate climbed 20 percent in April, compared with year ago figures, marking its best performance since November, according to a research note by Ben Schachter, a UBS analyst.
Yahoo, meanwhile, saw a year-over-year decline of 4 percent and Microsoft's MSN saw a drop of 9 percent.
And on the click-through rate, which takes the total number of searches divided by the sponsored clicks, Google's rate fell slightly in April to 10.5 percent, compared with 10.9 percent in the previous month. Yahoo posted a 12.5 percent click-through rate for April, verses 13.2 percent a month earlier. Microsoft, however, noticed a slight increase to 10.3 percent in April, compared with 10.2 percent, in the previous month.
"Paid click data released from ComScore is a positive read-through for Google's second quarter," Schachter said in his report. Shares of Google were up 2.91 percent in late morning trading to $584.80 a share.
Meanwhile, Google's coverage rate, which takes into account the percentage of search pages delivered with at least one paid ad on them, fell to 44.1 percent in April, compared with 45.5 percent in March.
"With fewer advertisements and more paid clicks, it appears that Google's advertising relevancy initiative is beginning to work," analysts Clay and Fred Moran of the Stanford Group stated in their research report.
Google's relevancy initiative aims to reduce the number of advertisements that appear on the right side of its search results, yet make the advertisements that it does carry target the desired audience with greater accuracy. As a result, Google hopes to charge a higher cost per click.
The coverage rate for Yahoo also fell in April to 69.4 percent from 70 percent in March, while Microsoft's MSN dropped to 63.8 percent in April from 65.5 percent.
In sizing up Yahoo, the Stanford Group stated: "Overall, there was nothing to get excited about for Yahoo...Queries also fell on a year-over-year basis, down 3 percent, suggesting that any initial year boost from Panama (has) tapered off as the company continues to struggle to maintain share in the market place."
Google and Microsoft, however, both posted double-digit increases in Web search queries. Google posted a 33 percent year-over-year increase in April, while Microsoft's MSN climbed 22 percent, compared with the previous year.
Yahoo shares fell roughly 5 percent in after-hours trading, as rumors swirled Microsoft was considering lowering its buyout bid for the Internet search pioneer.
Shares of Yahoo dropped to $27.01, or 4.76 percent, in after-hours trading, after Reuters, citing a source, reported Microsoft was considering re-evaluating its bid. The report noted that the possible re-evaluation stemmed from a concern that Yahoo's value may have declined since the initial offer was made February 1.
For Microsoft, the threat of lowering its bid may be as effective a weapon as waging a proxy fight or an exchange offer. In part, it would allow the software giant to appear to take the high road in its battle to bring Yahoo to the negotiating table, without possibly alienating Yahoo's employees, which the software giant hopes to retain in a merger.
Previously, sources familiar with the deal said Microsoft wanted to do a friendly merger and retain Yahoo employees.
And during a CNBC broadcast, it was said that Yahoo executives were planning to hold a meeting among themselves Monday regarding the Microsoft bid.
There is talking, and then there's talking.
Microsoft's CFO Chris Liddell told investors on Monday at the Morgan Stanley Technology Conference that Yahoo has "not yet formally responded" to Microsoft's unsolicited buyout bid.
Microsoft's big bid for Yahoo
Apparently, nothing has changed over the past two weeks, since we reported that Yahoo had not formally responded to Microsoft's offer and had remained "radio-silent."
And on the flip side, you have Liddell's boss, Microsoft Chief Executive Steve Ballmer, telling folks at CeBit in Hannover, Germany, that "a range of dialogue" has been occuring between the companies in regard to the buyout bid, according to an Associated Press report.
Meanwhile, in Henry Blodget's post on Silicon Alley Insider, he cites a source who indicates that the "range of dialogue" is occurring within Microsoft, rather than between the two companies.
However, it's not that far-fetched to envision representatives of both companies having informal talks, given that they run in the same circles, such as on board seats at Berkshire Hathaway and Morgan Stanley, or at technology conferences.
But when you're being pressed to open up your books and show the underbelly of your financials, this level of talks is in a whole different league. Think of it along the lines of talking to your neighbor about a huge bonus you received, verses showing your bank statement to that neighbor.
Get the picture.
In order to kick this deal forward, Yahoo has to have conviction. If Microsoft's offer falls short of valuing the company appropriately, then it will have to open up its books so Microsoft can fully understand its point and potentially raise its bid.
In the next two weeks, observers of the Microsoft-Yahoo courtship will get a telling signal as to whether it's headed for a shotgun marriage or a friendly embrace.
Yahoo has the option of extending the March 14 deadline for shareholders to nominate an opposition slate of directors for its next annual shareholder meeting, though it is expected to maintain a hard deadline.
"It's unlikely but not out of the realm of possibility to extend the date to nominate directors," said Bruce Goldfarb, chief executive of proxy solicitation firm Okapi Partners. "I don't see the motivation for Yahoo to do that. They could still negotiate after Microsoft files its slate. There's little reason to extend the date, unless they are already negotiating a friendly deal."
My bet is that Yahoo will extend the deadline, giving it more time to contemplate its options in a manner seen as friendly to Microsoft. Think if it this way: how easy is it to carry on a civil conversation and negotiate a deal when the other party's 10 thugs are beating up on you?
Microsoft has until March 14 to name its opposition slate of directors, and proxy solicitors say the Redmond giant should have no problem finding folks to fill out a 10-member slate. Yahoo's entire 10-member board is up for re-election at the next shareholder meeting. The date of the meeting has yet to be selected.
Yahoo has plenty of reasons to enter a friendly deal and wrap up talks ASAP. It's not only facing seven lawsuits from angry investors who argue that Microsoft's initial bid of $31 a share was fair, but it also noted in its regulatory filings that Yahoo employees, management, and executives are distracted by the Microsoft bid.
Adding to that stress is the fact that its other reported options, including a News Corp. investment deal and an AOL tie-up, are considered long shots by industry observers and analysts.
Microsoft's big bid for Yahoo
And while the days are counting down for Microsoft to have its slate in place, odds makers say they wouldn't be surprised to see University of Southern California corporate-governance professor Duke Bristow show up on such a slate. Bristow has served on other proxy fights before, including Oracle's slate in its drawn-out fight for PeopleSoft. I'm not aware of Bristow's stance on Microsoft's bid, since phone calls and e-mails have not been returned.
Representatives from Microsoft deferred deadline extension questions to Yahoo. And a Yahoo spokeswoman declined comment.
Yahoo, which is incorporated in Delaware, has a hard deadline for shareholders to name candidates, unless the company changes its bylaws or delays the date of its shareholder meeting, said Stephen Jenkins, a director with Delaware law firm Ashby & Geddes, which has represented a number of clients in proxy fights.
In order for Yahoo to extend its March 14 deadline for shareholders to nominate an opposition slate, it would need to do one of two things. Yahoo could change its bylaws and extend the notification period to a time closer to when the annual shareholder meeting is held, which currently is expected to be sometime between May 18 and July 7, or it can set its meeting sometime beyond July 7, thereby extending the notification period.
"The smart thing to do would be to extend the deadline, if they don't want to talk yet but they don't want to force Microsoft's hand," Jenkins said.
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