Microsoft Still Wants a Piece of Yahoo
All of the business websites are reporting it: Microsoft CEO Steve Ballmer is still keen to purchase at least a part of Yahoo, even after seeing his $47.5 billion offer for the entire search engine company firmly rebuffed by then-CEO Jerry Yang last year. With new CEO Carol Bartz at Yahoo's helm, it looks a lot more likely that some kind of deal will happen.
Ballmer reiterated his interest while being interviewed by Steve Adler, BusinessWeek's editor-in-chief, at the McGraw-Hill Media Summit. Contrary to popular belief, Microsoft isn't looking to get Yahoo's technology. They probably don't need to, considering that they've already hired away at least 10 Yahoo engineers in recent days. No, a deal would be focused on getting pooled volume, the increased audience. If you have more users, you can get more ad revenue. And you can make the ads more dynamic, targeting them more precisely to your audience.
While Ballmer believes that Over time, there's still a good opportunity to do a deal with Yahoo, he seems prepared to wait for a bit. He's spoken with Bartz once, to congratulation her on her new position. He expects to sit down with her for a much more lengthy chat after she settles into her new position. Sachin Shah, an analyst with ICAP, noted that Bartz knows her company needs to do a deal, but Right now, she's still trying to understand the situation.
And there's a lot to understand. Yahoo has its hands in more different kinds of online properties than you can shake a stick at: email, search, news, financial sites, multiple kinds of social networking sites, and the list goes on and on. With all of those sites, Yahoo has still seen its earnings decline for three straight years. Getting a grip on this isn't going to come overnight, but Bartz will need to make a move fairly soon.
The sad part is that a move now may still be too little, too late to slow Google. Combine the revenue from Microsoft's and Yahoo's search engine and online advertising businesses in the fourth quarter, and it's less than half of what Google alone generated in the same period. While it's less popular overseas, Google receives 63 percent of US queries. It's hard to beat that kind of momentum.
Then again, beating Google's momentum may not be the goal, at least at first. Microsoft's current share of the US search market is less than 10 percent; combining with Yahoo would give it a total of 30 percent. That's at least decent in comparison, and something to give Microsoft a fighting chance. Any other option is, apparently, unthinkable. Some people say to me, 'Why don't you just give up?' Ballmer observed. This is a huge market. You give up, you can't get back in the game.
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