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Microsoft Offers New Yahoo Deal : Buying Search Technology?

Microsoft today issued a new statement which says that the company is opening up talks again with Yahoo, but not to acquire the entire company (which it backed out of earlier in the month). Instead, Microsoft is looking to only buy the parts of Yahoo which would benefit Microsoft’s new direction in its quest to compete with Google.

In light of developments since the withdrawal of the Microsoft proposal to acquire Yahoo! Inc., Microsoft announced that it is continuing to explore and pursue its alternatives to improve and expand its online services and advertising business.

Microsoft is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo!

Microsoft is not proposing to make a new bid to acquire all of Yahoo! at this time, but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo! or discussions with shareholders of Yahoo! or Microsoft or with other third parties.

There of course can be no assurance that any transaction will result from these discussions.

Expand its online services and advertising business by acquiring one part of Yahoo? But what would that part of Yahoo be?

What Part of Yahoo does Microsoft Want?

Microsoft’s and are starting points of the web. Hotmail is a preferred global email of millions. MSN Messenger is widespread and the Internet Explorer browser is on almost every computer off the shelves.

Is it Yahoo Search Technology or Yahoo Search Marketing that Microsoft is after?

Or is the real question here, could Yahoo survive if it were too sell its search engine division to Microsoft?

Can Yahoo Survive Without Search?

Probably so, but it would make much more sense for Yahoo to sell Microsoft its Yahoo Search Marketing and not Yahoo Search itself.

If Yahoo’s direction is to become more open and more social, the company could benefit from the sale of Yahoo Search Marketing to Microsoft. Microsoft is quite familiar with Yahoo Search Marketing revenue as Overture had monetized MSN Search until 2005.

Such a move would let Yahoo keep its core Yahoo Search Technology and then syndicating Microsoft Search Ads and/or Google AdWords in its sponsored links area; further leading to a more efficient Yahoo which isn’t tied down to competing with Google AdWords anymore in the paid search arena, which they have had problems with fully monetizing to its potential for years.

Yahoo may be able to in fact increase its revenue from search or sponsored search by working on a very Yahoo favorable revenue share split from either company, forcing a bidding war between Google and the new Microsoft owned & operated Yahoo Search Marketing (or a long term Google partnership).

Microsoft could also take the Yahoo Publisher Network, the Yahoo answer to Google AdSense which never took off, to the next level.

Without Search, Yahoo’s Focus More Sharper?

Yahoo’s future seems to be more in the direction of their mega social networking capabilities, which would bring about a new opportunity for display advertising, a market which Yahoo has been successful with given the rise of its Newspaper Consortium and recent Yahoo! Buzz project, which sends Yahoo member traffic to partnered and trusted websites (some of which are running Yahoo personalized ads to that Buzz traffic.)

If Microsoft has its eyes on a search technology, why target Yahoo instead of other search technologies such as Teoma which may be better than Yahoo?

One thing we definitely know, Microsoft knows how to keep the drama unfolding and pressure Yahoo to make a move via publicly motivating its shareholders. The rest of May should prove to be an interesting month.

Update : Yahoo Responds

Yahoo has issued this press statement with their response to the earlier Microsoft statement :

Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, today issued the following statement in response to the announcement by Microsoft Corporation that it is continuing to review potential transactions with Yahoo!:

“Yahoo! has confirmed with Microsoft that it is not interested in pursuing an acquisition of all of Yahoo! at this time. Yahoo! and its Board of Directors continue to consider a number of value maximizing strategic alternatives for Yahoo!, and we remain open to pursuing any transaction which is in the best interest of our stockholders. Yahoo!’s Board of Directors will evaluate each of our alternatives, including any Microsoft proposal, consistent with its fiduciary duties, with a focus on maximizing stockholder value.”

Category SEO
SEJ STAFF Loren Baker Founder at Foundation Digital

Loren Baker is the Founder of SEJ, an Advisor at Alpha Brand Media and runs Foundation Digital, a digital marketing ...

Microsoft Offers New Yahoo Deal : Buying Search Technology?

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