Posted May 4, 2007 7:07 pm by with 29 comments

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UPDATE 2: Microsoft has made a $44.6B bid for Yahoo, details here.

UPDATE: WSJ is reporting the talks are not ongoing.

Microsoft and Yahoo in recent months discussed a possible merger of the two companies or some kind of match-up that would pair their respective strengths, say people familiar with the situation. But the merger discussions are no longer active, these people say. The two companies may still explore other ways of cooperating.


Nothing like a bit of rumor and speculation to kick-off a Friday. The New York Post is reporting that Microsoft is tired of losing out to Google and is trying to re-start acquisition talks with Yahoo.

The new approach follows an offer Microsoft made to acquire Yahoo! a few months ago, sources said. But Yahoo! spurned the advances of the Redmond, Wash.-based software giant. Wall Street sources put a roughly $50 billion price tag on Yahoo!.

It makes sense on a number of levels. Microsoft and Yahoo combined, might have a chance of actually competing with Google as they would hold a combined search advertising market-share of 27%. That’s still a long way from Google’s 65% share, but it’s a whole lot better than they have now.

Microsoft would certainly benefit from placing all of its online advertising efforts under the Yahoo brand, while Yahoo could help bring it’s younger audience to MSFTs other products such as the Xbox and Office.

Still, with cost savings comes redundancy. Both Yahoo and Microsoft have recently spent hundreds of millions (billions?) in developing their own search marketing platform. They wouldn’t need both, so would they ditch one in favor of the other? More likely, they’d combine the best parts of each and create a more stable challenger to Google’s AdWords. For example, Yahoo’s algorithm and console would be my pick, with Microsoft’s audience demographics being a welcome addition.

Speaking of demographics. As the NYP points out, Yahoo has the attention of the younger crowd, while Microsoft’s is older and more business oriented, so they’d compliment each other very well.

How likely is this merger? Who knows? A $50 billion price tag is a steep price to pay, to simply take a few steps closer to Google. Both Microsoft and Yahoo opened the anti-trust can of worms, by complaining about Google’s DoubleClick acquisition, so it will be hard to shove those worms back in the canister, if they try to move forward with their merger.

Finally, Yahoo CEO Terry Semel’s career is certainly resting on the success of Yahoo to successfully compete with Google, now that Panama is deployed. If he has any indication that things aren’t going too well, selling to Microsoft would be an easy exit and he’d walk away as the man that grew Yahoo to one of the most powerful online players, negotiating one of the largest mergers in history. That would look a whole lot better, than consecutive quarters of failing to compete against Google.

  • This has always been something that I could really see happening. The real question is, like you said, do you use two different algo’s with two different sets of equations being developed. Probably not imo, they would scrap one for the other. If they were smart they would combine the two some how and create a best of breed model that could potentially give google a run for its money (something that is severely needed at this juncture in the game).

  • As Brian said, I’d love to see them combine the two algorithms as well as their market share. The industry needs someone to knock Google off their perch or at the very least scare them into becoming a better company. A price war for advertisers between Panama and AdSense would be fantastic and Google not being able to single handedly dictate the internet’s stance on paid clicks would be even better. I’m crossing my fingers and hoping this one happens.

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  • I think Yahoo + Microsoft

  • Yes Nishita (Yahoo + Microsoft) is very less then the sum of (GOOGLE)

    Its like 1+2 = 10 and in reality its a wrong mathematics… 🙂

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  • I just wonder if it will be a full buyout or if they are working of some other type of linkup. I just don’t think it makes sense for MSFT to just buy them and operate the company as a piece of MSFT. Some other type of joint venture or collaboration seems to make more sense to me.

  • Well, i made the sum; Yahoo+Microsoft >=? Google

  • Mauricio


    In your last line:

    “That would look a whole lot better, than consecutive quarters of failing to compete against Yahoo.”

    I think you really meant compete against Google.


  • @Mauricio – I sure did, thanks!

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  • Taylor

    A microsoft/yahoo merger would be interesting, though I don’t picture it going well, for whatever reason. Maybe I am still reeling from the AOL Time Warner fiasco.

    You’ve got a lot of useful information up here…I don’t know if you know about the Blogger’s Choice Awards but they have a “Best Marketing Blog” category that you should check out. If you’re not already nominated, you are welcome to nominate yourself. If you’re already nominated, you can grab some embed code that puts a “vote for me” button up on your site so that your readers can make sure you win and get sent to the awards ceremony in November.

    Worth a shot to get something back. Anyway, best of luck, and keep on blogging, and I’ll keep on reading.

  • They a third contributer to make the power for fighting against google.

  • I heard a rumor about Google wanting to buy Yahoo. When I first heard this, I didn’t think much of it since I didn’t read about it on marketing pilgrim ;P

    Any comments on this?

  • @Dario – not heard it. If we do, you’ll be the first to know! 😉

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  • leo

    google will win yahoo.. but if microsoft buy yahoo it be a duh answer =/

  • Ramesh

    it would be a hard luck to the customers of yahoo. because yahoo provides so many friendly free services to users.but if micorsoft takes yahoo,then users will get some benifits earlier but later users will have to pay for everything.
    (like hotmail chat – ear lier its free)


  • Google will still win over yahoo+microsoft because they are always making themselves ahead.
    See what’s google been doing

  • I don’t think Yahoo! should allow microsoft to buy them i mean microsoft just buy everything, and they just don’t make things better more like worse, i mean if they are going to make it look like msn (search engine) then it’s going to be awful due to the reason msn takes ages to load (well longer anyway) because of the color and images in it, unlike most search engine which load fast with white backgrounds. Microsoft haven’t got it write and they never will, even still buying the second most popular search engine still wont get microsoft anywhere, because everyone are still going to use google because people don’t like change, search engines like are 10 times better than google but people still use google i am just as bad so yahoo! don’t accept the offer!

  • Microsoft+Yahoo
    Are you fine with this logo?

  • i really hope yahoo! don’t except, they could have pride and can’t let microsoft buy and ruin it!

  • Araz

    i hate to MICROSOFT if microsoft bought yahoo i’ll go to google mail

  • adam

    lets make an anti-,icrosoft compane lol, and stop them from buying anything and everything lol!

  • adam

    microsoft not ,icrosoft lol


  • Diego

    microsoft buying yahoo! is a worst case scenario. google`s products have been innovative and stable. the mail engine is still in the beta stage. yahoo! is a good mail engine in its own right. it does not have to merge with microsoft.

    maybe google could merge with an open source porject like linux and go for a new open source OS(never merge with solaris; i hate it)…

  • neel

    I am worried about the yahoo messenger..It will be paid or removed 🙁

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