Microsoft & Yahoo Said To Be Talking Merger, Cooperation

Both the New York Post and the Wall Street Journal are reporting that sources say Microsoft and Yahoo are talking again about how they might merge or cooperate.

The New York Post slants the move as a Microsoft reaching out situation:

Stung by the loss of Internet advertising firm DoubleClick to Google last month, Microsoft has intensified its pursuit of a deal with Yahoo!, asking the company to re-enter formal negotiations, The Post has learned.

The new approach follows an offer Microsoft made to acquire Yahoo! a few months ago, sources said. But Yahoo! spurned the advances of the Redmond, Wash.-based software giant. Wall Street sources put a roughly $50 billion price tag on Yahoo!.

From the Wall Street Journal:

In what appear to be early-stage discussions, executives at Microsoft and Yahoo are taking a fresh look at a merger of the two companies or some kind of match-up that would pair their companies’ respective strengths, say people familiar with the situation.

Last year, both sides talked, but Yahoo CEO Terry Semel squashed any idea that Yahoo felt it needed to work with Microsoft. From a Financial Times article last year:

“Microsoft taking over Yahoo – that conversation has never come up,” Mr Semel said at a talk organised by the Newhouse communications school of Syracuse University. “[We discussed] search, and Microsoft co-owning some of our search. I will not sell a piece of search – it is like selling your right arm while keeping your left; it does not make any sense.”

…. “My impartial advice to Microsoft is that you have no chance,” Mr Semel said. “The search business has been formed.”

Indeed, there’s a less compelling case now for the two to combine for technological reasons than several years ago. As I wrote about the idea recently when looking at Microsoft’s past moves in search:

An acquisition made tons of sense before Microsoft built its own crawler and ad system. Now it has both. Getting Yahoo last year might have saved Yahoo from upgrading its own ad system, since it could have used the new one Microsoft built. But Yahoo has finished that work, as well. So a merger or acquisition makes less sense — and the brand confusion potential remains significant. But stranger things have worked.

Yahoo has largely held its own against Google in search, while Microsoft has lost share. However, Yahoo suffers from a perception with analysts that it is in trouble, especially when recent earnings disappointed them.

Of course, if Yahoo is for sale, Google may be interested. Just had to throw that out there.

Discussion now going at Techmeme, for more.

Related Topics: Channel: Industry | Microsoft: Business Issues | Microsoft: General | Yahoo: Business Issues | Yahoo: General


About The Author: is a Founding Editor of Search Engine Land. He’s a widely cited authority on search engines and search marketing issues who has covered the space since 1996. Danny also serves as Chief Content Officer for Third Door Media, which publishes Search Engine Land and produces the SMX: Search Marketing Expo conference series. He has a personal blog called Daggle (and keeps his disclosures page there). He can be found on Facebook, Google + and microblogs on Twitter as @dannysullivan.

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  • ciaran

    I know that this sounds ridiculous, but I can actually see more benefit in a Google/Yahoo! match up than with MSN – Yahoo! strikes me as having the best of the social networks, whilst Google has stomped all over search….

  • gary price

    What a busy week for “possible” acquisitions. A couple of comments.

    Microsoft and Yahoo already have a “small deal” in place with the recent linking/interoperability between their IM services.

    At the very end of 2006, Merrill Lynch was saying that a possible hook-up between Yahoo and AOL was a possibility in 2007.

    You posted on Tuesday about an unsolicited bid for Dow Jones by News Corp. Today, we read of information powerhouse Thomson “talking” about a deal for Reuters. We’ve known for several months that Thomson is shopping their Learning division that includes database/info subsidiary, Thomson Gale.

  • gary price

    Well, it appears that once again talk about a Microsoft / Yahoo hook-up are over. Reuters, “citing people familiar with the situation,” reports that talks between MSFT and YHOO are, “no longer active.”

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