AVIARA, California: "Yahoo has a great business. Kudos to them, but we're bigger globally," Microsoft's chief advertising strategist Yusuf Mehdi told Goldman Sachs's Annual Internet Conference on Wednesday.

"We have half a billion people," Mehdi boasted in response to a question as to his company's rumored interest in Yahoo. "We think we have all of the pieces to reach our [internet] target."

However, he conceded that some smaller acquisitions are possible - and failed to deny that a bid for Yahoo could be on the cards.

Mehdi anticipates Microsoft will shortly start to regain some of the market share in search activity and ad revenues lost to Google over the past few years.

In the short-term, improvement is likely to be incremental. He also emphasized that competition in the search arena is still in its early stages and that getting users better results faster will be key.

Continued Mehdi: "I still don't think it's the end of inning one. Google is a good product and a good brand, and you can't just match that. You have to do something big and bold and different. Nobody's really done that yet."

Microsoft's recent aQuantive deal [WARC News: 21-May-07] will extend the software titan's reach to advertisers -currently a mere 50,000 - to hundreds of thousands and within sight of Google, he said.

Targeted advertising in display is the exploding market, compared with search-based advertising, declared Mehdi, "and aQuantive has the technology to be a major player in the targeted display placement market . . . It's no longer just about paid search. It's a converged marketplace."

Data sourced from Wall Street Journal Online. additional content by WARC staff