Yahoo & Microsoft Have Talked Partnering, Merging

I was talking with Kevin Delaney of the Wall Street Journal on Monday
about search things in general and mentioned the sense it makes for Microsoft
and Yahoo to get together. Microsoft is behind with the core search technology.
Yahoo’s been struggling to upgrade its paid search service. Let’s get these two
kids together! And today in the Wall Street Journal, it turns out that there’s
apparently a faction at Microsoft that wants to do just that.

Paid Content,
A Microsoft,
Yahoo Tie-Up?
from the Wall Street Journal has the details. Kevin and
colleague Robert Guth write of there being two factions within Microsoft — the
“let’s built it ourselves” group that has been in control so far and the “let’s
acquire” group apparently led by Microsoft senior vice president Hank Vigil.

Vigil is said to have led the failed negotiations to combine MSN with AOL.
Frankly, a Yahoo deal makes more sense than that. AOL would have provided
existing traffic but not solid search technology. Yahoo provides plenty of
traffic, along with core search technology and a healthy, first-hand advertiser

What’s not to love? Probably the high price of the acquisition, plus whether
Yahoo — especially cofounder Jerry Yang — would go for it. But apparently it’s
plausible enough that both companies have talked informally over the past year.

The Wall Street Journal cites the
hiring of Steve
Berkowitz by Microsoft
as perhaps being a tipping point. I’d certainly
agree. Steve is the first serious outside person Microsoft has brought in for
its battle in the
search wars.
Bringing him on was a big sign that what Microsoft has been trying to do
internally hasn’t been working — and so something radical such as an Ask or
Yahoo acquisition might be in order.

The big downside is that such an acquisition would give Microsoft yet another
brand to confuse consumers with. After spending hundreds of millions of dollars
over the years to push MSN, they’ve now shifted things behind making the stupid
Windows Live brand their flagship. It’s stupid for so many reasons. Let me
bullet point two major ones:

  • Most people I know don’t really like the Windows brand. Heck, I’m a
    Windows person, fairly anti-Mac, but Windows still represents crashes and
    glitches to me. And this is the label you want to attach to your online
  • We’re moving into a world where the operating system and my web-based
    services aren’t necessarily connected. I love Outlook. I live in Outlook. But
    online, I might want to sync Outlook with Yahoo or Google’s calendar. Forcing
    me to think — overtly or indirectly through branding — that I have to use
    all your products makes me want to use none of them. Let MSN operate as if it
    wasn’t linked to your operating system or your browser and it will be a
    stronger service in the long run, not weaker.

So Microsoft’s already coping with the confusion of two major brands. Adding
in Yahoo further confuses matters, unless they perhaps make a brave, bold move
and put everything behind the brand leader in the space, Yahoo.



Ballmer defends Microsoft’s spending increase
from the Seattle Times covers
a likely leaked memo from Microsoft CEO Steve Ballmer naming Google as one of
the company’s chief competitors and requiring further “heavy investments” in
search. The goal, which we’ve heard before, is to create “the web’s largest
advertising network, giving us an engine that twill enable us to monetize our
services and compete against Google.”

Ah — but to compete against Google, you don’t need an advertising network.
You first need a quality core web search engine, which your heavy investment to
date has failed to create. And so back to Yahoo, which has exactly what
Microsoft needs, that core technology.

Microsoft’s AdCenter May Fail to Topple Google From Dominance
from Bloomberg
covers how advertisers are getting a more formal look at the MSN adCenter
service that Microsoft has rolled out over the past few months. Unlike
Microsoft’s failure in web search, I’d say adCenter is a big success. The
service already has plenty of advertisers using it — and anecdotally continues
to draw lots of praise for its features.

Features ultimately mean little, of course. As the story cites, it’s about
volume. MSN could have rolled out a terrible product that advertisers would have
coped with simply because it was the only way to reach MSN’s substantial
traffic. But to the company’s credit, they did not do that. Instead, they’ve
continued to refine and tweak and take advertiser feedback in a way that has
earned them raves I rarely hear recently about the systems at Google or Yahoo.
Volume remains key, but the features and wooing still certainly help.

And that brings us back to Yahoo, which
has been
with an antiquated paid listings toolset.
Counterattack On Google
from BusinessWeek covers how Yahoo’s “Panama” update
to its paid listings system has been progressing over the past two years and is
nearing completion. But BusinessWeek correctly summarizes, in my view, the
changes are more about bringing Yahoo up to Google’s level of features rather
than leapfrogging past Google and into features like MSN offers.

It’s another argument that makes the idea of Yahoo and Microsoft getting
together not wacky at all.

Want to comment or discuss? Visit our Search Engine Watch Forums thread,
Yahoo &
Microsoft To Combine

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