The Microsoft / Yahoo! saga continues with a new approach by Microsoft to buy Yahoo!'s search business. As reported by The New York Times, the new offer marks a formal alliance between Microsoft and Carl Icahn, the billionaire investor who has been trying to oust Yahoo!'s board and creating an increasingly hostile and aggressive approach to achieve his - and Microsoft's - desired outcome.

Yahoo! quickly rejected the new offer and the board, who are defending their own positions, appealed to shareholders to reject the approach as a bad move for Yahoo! This latest move is likely to reach a showdown at the annual shareholder meeting at the start of August. Yahoo’s board apparently indicated to Microsoft on Saturday that it was willing to sell the whole company at $33 a share, which was the price first offered by Microsoft back in May, which Yahoo had rejected.

More details about the latest negotiations are included in the article and this story is bound to generate much more coverage and comment until such point as a definite outcome is achieved.

Labels: microsoft, search business, yahoo

After much speculation, Yahoo! has now agreed a deal with Google to carry their search advertising in return for a revenue share. As reported by many news agencies, including Reuters, the deal forms a non-exclusive partnership and Yahoo! say they have made this move after failing to agree a deal with Microsoft who had revised their earlier acquisition approach to now buy just Yahoo!'s search business.

Under the new arrangement with Google (which follows an earlier trial period), Yahoo! will run Google's AdSense PPC adverts alongside its own search results and on some of its websites, but only in the United States and Canada for the time being. Yahoo! will also retain control over where the Google ads will run and which search terms will be used - there is more information published by Google on their official blog. The deal has been agreed to initially cover four years, with options to renew it up to a period of 10 years.

Yahoo! must see this as part of a rescue plan for its ailing business since it expects the deal to create an additional $250 million to $450 million operating cash flow within the first year. However, within the brief press release there is no mention of what impact this arrangement will have with Yahoo!'s own PPC service and for the advertisers currently running accounts in these regions, but it seems to indicate that Yahoo! expect to make more from this model than developing their own service. More on this should become clearer over the next few weeks or months.

Labels: google, ppc, yahoo

Not surprisingly, the Microsoft - Yahoo! story is unlikely to go away for some time and there are still possible discussions and initiatives to be developed by either party to get to their ultimate objective. As widely reported, including by The Sydney Morning Herald, Microsoft are apparently talking to Yahoo! again about some form of joint partnership, partly to keep the door open to an eventual takeover but also to block any moves that Google may be trying to fill the space of the abandoned acquisition attempt.

Yahoo! is also having to keep an eye on a potential proxy fight from shareholders, led my billionaire investor Carl Icahn who has criticised the Yahoo! board for their handling of the Microsoft offer. The rumours are that Microsoft are discussion some form of joint advertising arrangement with Yahoo!, based on search advertising or targeted display advertising, to try to ward off a stronger partnership being formed between Yahoo! and Google.

There's almost an inevitability that the 3 main players within the search market will merge in some format eventually -and most likely a Microsoft-Yahoo! deal - which will not be good news for the overall market and advertisers, but probably a natural progression for the runners-up to try to tackle Google's strengthening monopoly.

Labels: microsoft, search business, yahoo

The New York Times reports that Google executives have expressed a desire to develop the advertising relationship with Yahoo! that was tested for several weeks recently with AdWords appearing alongside Yahoo!'s search results. This is partly a move to ward off any possible future attempts by Microsoft to make a bid for Yahoo! but could also be a lucrative development for both Google and Yahoo!

Any arrangement, should it go ahead, would face antitrust investigation in the US due to the dominance of the search advertising market by the two companies. It would also have serious implications for Yahoo!'s own PPC advertising system, which is still struggling to compete against Google, despite a facelift and relaunch in recent years. Such a move would also place even more power within Google's control and advertisers would have even fewer options to place search advertising so that bid rates would continue to rise.

Labels: google, ppc, yahoo

The ongoing saga of Microsoft's attempts to buy Yahoo! came to an abrupt halt on Saturday when a top level meetings between the executives of both companies failed to reach an agreement. Despite Microsoft upping their bid price to nearly US$50bn, Yahoo! still held out their position that the bid was undervaluing the business and so Microsoft finally withdrew their offer.

Shares in Yahoo! fell as news of this development reached the markets, and the question now remains - what will Yahoo! do now? Will they continue to pursue the other business alignments that were being investigated during the takeover offer period, such as with AOL, or try to build on the recent advertising trial with Google?

It's no doubt good news for the web search market that Microsoft hasn't pursued this acquisition to a successful conclusion, but it now leaves Yahoo! in a weaker position from which they need to develop their business and services to help them maintain their position in the market, and to protect themselves from other predatory takeover attempts. Microsoft are also likely to be reviewing the outcome and deciding where to spend their cash now and it may eventually come about that another purchase attempt will be made if Yahoo!'s value takes another hit in the future.

Labels: microsoft, search business, yahoo