Microsoft has been in talks with Yahoo! about potentially acquiring a major portion of the company, according to a report published Wednesday.
Members of the company’s top management are considering a deal despite Microsoft’s history of winning over major technology markets – think Web browsers – on its own, The Wall Street Journal said.
Microsoft has tried to compete in the burgeoning online search and Web advertising categories on its own but made little progress as Google has made massive gains as the industry leader, according to the story.
Microsoft executives hope that Yahoo’s strength in search and advertising categories would give the company a stronger foothold on the Web, the report said. So far, millions of dollars invested in search-engine technology and online ad systems have yielded little in the way of revenue or market share for the company, according to the Journal.
From the Journal piece:
A Microsoft-Yahoo combination could merge complementary strengths. To succeed in Internet-search advertising — the business driving Google’s growth — a competitor needs three core elements: strong technology, a mass of consumers and a universe of different advertisers. Microsoft is spending untold hundreds of millions of dollars on the technology piece, but it doesn’t yet have enough consumers using its MSN service to entice the needed advertisers.
A tie-up with Yahoo could address part of that problem. It has more than 100 million people visiting its site a month, making it the most popular Web site in the U.S. So far it is losing the race to Google when it comes to the technology for matching ads to consumer search queries, though it plans to unveil an upgrade to its system this month.
Combined, MSN and Yahoo would have all three pieces and, at least on paper, could leapfrog Google. Combined, the companies would have the “technology and the scale,” to compete, says Ellen Siminoff, a former Yahoo senior vice president and now chief executive of search marketing company Efficient Frontier Inc.
Read the articles…they’re fascinating.