“Some love stories are eternal, Romeo and Juliet, Luke and Laura, and now Microsoft and Yahoo!. How else do you describe it? Like a lover’s quarrel going on between the companies. Microsoft CEO Steve Ballmer keeping the door open between the marriage between the companies. The dream that lives on…Keep in mind, while a deal seems economically attractive, they have not sat down formally as Ballmer is waiting for a time that seems more appropriate. He’s waiting for Carol Bartz, the new CEO of Yahoo!, to get settled in, in her new position…Jonathan Miller, former guy who ran AOL…expects consolidation going on this year saying, ‘I don’t know how anyone competes with Google on their own.’ it’s not just about love, it’s about being competitive and the door is open again.”
This clip was a part of the Fox Business Network’s afternoon coverage. Of course, no one believes that there really is any sort of affinity between Microsoft (MSFT) and Yahoo! (YHOO). Although, the constant rumors and breakups do sort of remind you of a middle school romance. However, what they do have is a common enemy, in terms of search, in the clear market share leader Google (GOOG). In recent studies of market share Google has more than 70% of the market and Yahoo! is a distant second at 19%, according to Compete.com. Microsoft’s offering, MSN/Live is tiny in comparison at under 7% of total market share. Clearly, if these two smaller search competitors want to get their piece of the lucrative search advertising market they will likely need to merge. Online ad sales are suffering in the recession, but not nearly to the extent of the slump in print and television ad sales. Everyone is well aware that, online ads will be a huge part of the advertising picture going forward into the future as well.
At this point, Microsoft and Yahoo! are pretty much one-trick-ponies; Microsoft with the operating system and Yahoo as a web portal. Microsoft needs to figure out a winning strategy in an increasingly web based word, perhaps Yahoo! has the answers. For the two to join forces could potentially make a lot of sense, but a deal is not imminent. Ballmer has stated that he wants to give Bartz time to get her bearings before formally talking. After all, we have been down this road before with much of the negotiating going on beyond the negotiating table in the press. The fumbling of the first attempt by Microsoft is part of the reason that Bartz was brought on to replace Jerry Yang as the company’s head. Bartz has made it clear, were talks to formally resume she wants them to be held more closely to the vest to avoid the media circus. Microsoft’s first attempt at takeover of Yahoo! was for a total of nearly $45 billion, now more than a year later the company’s market cap is less than half of that. If I were Steve Ballmer, I wouldn’t necessarily rush into anything either. Microsoft might be better served to see how things play out in the economy rather than jump into something without all the information.