Blog: Analysis: Microsoft-Yahoo search deal
After failing to buy Yahoo outright a year ago, Microsoft has now announced a search and advertising partnership with its former online rival. It’s an important deal, and not just for advertisers.
Poor Yahoo shareholders. They could have pocketed a cool $44.6bn, or $33 a share, when Microsoft offered to buy Yahoo outright.
Eighteen months on, the shares are trading at just under $16 and they have to make do with the promise that Microsoft will help Yahoo to survive and grow by providing a better search, and thus a better advertising platform
This is not a partnership of love, but necessity. A year ago, I called the proposed Yahoo-Microsoft merger a shotgun wedding, with Google holding the shotgun.
Since then, Google has upgraded its weaponry and extended its lead in search advertising, the one online business model that truly works.
For Yahoo and Microsoft, Google is the enemy who – Harry Potter style – must-not-be-named. During their 45 minute conference call neither Ms Bartz nor Microsoft boss Steve Ballmer used the word Google even once.
Instead they spoke of becoming “a strong number two competitor in the market” and the need to create a credible alternative for advertisers.
Indeed, advertisers will only be too happy to bolster the Microsoft-Yahoo partnership. Whether small online retailers or advertising giants like WPP, many were worried about Google’s near-monopoly in the search advertising market.
Competition will not only keep Google on its toes, but should help to control prices as well.
Tags: search