Microsoft, Yahoo in Anti-Google Alliance Talks

09 May 2007

NEW YORK: Microsoft and Yahoo are downplaying talk of merger while continuing to discuss ways in which they can cooperate to counter Google's ever-increasing dominance of the internet ad market.

Although such discussions have been in train for more than a year, Yahoo shares soared Monday after Friday's report in Clan Murdoch's New York Post that the two titans are in talks that could lead to a Microsoft takeover.

Microsoft declined to comment on the Post's report, while a Yahoo spokeswoman said the company did not discuss "rumors and speculation." Such peremptory dismissals, of course, simply fanned the flames of scuttlebutt.

As recently as March, UBS analyst Heather Bellini opined that buying Yahoo would "improve Microsoft's position dramatically as well as alter the competitive dynamics of the search industry".

However, some key executives at the number two internet search company are less than enamored at the prospect of assimilation by Microsoft. They argue that Yahoo's single focus on the internet is its major strength.

According to an insider, one option on the table is the linking of the Yahoo and MSN advertising networks to spur additional web traffic; another possibility is an internet-only partnership, rather than an absolute acquisition.

According to Nielsen/NetRatings' March data, Google accounted for 54% of all US online searches, more than twice that of Yahoo at 22%.

Data sourced from International Herald-Tribune; additional content by WARC staff