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So, there’s good news and bad news from the Yahoo camp for Microsoft.

The good news is that Yahoo is definitely open to the idea of a buyout.

The bad news is that it’s gonna cost Microsoft much more than they originally anticipated.

Yahoo responded to Microsoft’s buyout bid by reiterating that the $44.6 billion offer undervalued the search engine and online mega-portal. Despite the fact that Yahoo share prices have recently dipped to well below the offered price of $31/share, Yahoo is confident that they can get more out of a potential buyer. Other names that have been discussed as interested in Yahoo include News Corp. and Time Warner Inc.

Personally, I’m not sure how I feel about the idea of Yahoo becoming the property of Microsoft. The effects on paid search would be difficult to predict. Many remember that Yahoo and Microsoft shared Overture as a paid search provider years ago and, since Microsoft broke away from Yahoo in mid-2006, the companies have moved in different directions in terms of the quality of their search products.

Although Google’s AdWords product is unmatched in terms of usability and efficiency, I think that it would be fair to say that Yahoo, especially since its move in 2007 to the “Panama” platform, has made significant strides to improve. Whereas Overture and Yahoo Search Marketing in its infancy were very difficult to use and were often easily ignored by users who frequently dedicated their entire search budget to Google, nowadays, we find that Yahoo is, at the very least, an excellent supplement to an active Google AdWords account and, in some cases, a flat-out better provider of quality traffic.

Microsoft’s MSN adCenter product, on the other hand, continues to baffle users and agencies alike. With an inefficient user interface, an inability to opt out of unpredictable traffic drivers such as a-list, and a still developing support staff, Microsoft has, in many ways, regressed even from the days of Overture. Who’s to say that Microsoft, despite its war chest of funding, wouldn’t simply degrade the quality of Yahoo’s product in the event of a takeover, leaving Google without any real competition? It’s a frightening possibility.

It’s unclear whether Microsoft will balk at Yahoo’s demand for a better offer or whether this was an expected move from the opposition in what will inevitably be a buyout. For search marketers, though, I feel that there is some cause for optimism in either scenario. If Microsoft does balk and Yahoo remains independent, I feel that it really puts the pressure on Yahoo to continue to invest in their search marketing product in an effort to narrow the usability gap between Google AdWords and itself. In the event of a takeover, I would hope that Microsoft would be more likely to integrate with Yahoo’s current model or upgrade their current system to include some of the improvements that Yahoo’s system offers. Microsoft is many things, but it is not a stupid company; we could potentially end up with a product superior to the current Yahoo and MSN products that integrates both engines.

The ball is back in Microsoft’s court. Unless they are ready to pony up more cash, Yahosoft remains purely fictitious.

**Update: There was an interesting BusinessWeek article backing Yahoo’s play of holding out.  Check it out.


3 thoughts on “Yahosoft Still a Possibility
  1. Mike says:

    What a roller coaster for me and YHOO 😉

    I think that two things really did not help this deal for Microsoft, 1) Steve Ballmer and 2) Microsoft’s stock price. Ballmer, by trying to go around the Yahoo board and then threatening that the offer was time sensitive definitely did not help gain favor for the deal. Also, the decline in MSFT stock price kept lowering the overall value of the deal. Maybe that is why Ballmer got impatient…

  2. Amir says:

    Google seems to have cornered the market of being intuitive online. Their fingers are literally in every pie, and even the pies you never thought of. I think it’s going to be difficult for MSYahoo! (sounds like “messiah” or “matisyahu”), if and when it happens, to rally an effective comeback.

    It’ll probably go something like this did:


  3. Chris Laub says:

    Yahoo is sure making things difficult for Microsoft. I love their move to let Google run sponsored link ads on 3% of their search results. What a great way to play hardball with Ballmer. While Google/Yahoo both decline the move was intended to imply a potential merger, it would sure make our jobs easier!

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