Microsoft and Yahoo in ad alliance talks, again

Chicago (IL) – It appears that Microsoft and Yahoo are ready to chat about a business relationship again. Media reports suggest that Microsoft’s Steve Ballmer met with Yahoo’s new CEO Carol Bartz to discuss opportunities in search advertising.

According to an article published by the New York Times, Microsoft and Yahoo are carefully approaching each other again. The newspaper referred to sources close to the talks, stating the Ballmer and Bartz discussed ways to “to pool their advertising efforts, including a possible partnership under which Microsoft would sell search ads for Yahoo, and Yahoo, in turn, would sell display ads on Microsoft properties.” However, the source also mentioned that the talks are in an early stage and they may not lead to an agreement.
However, we are also quite sure that Ballmer and Bartz do not meet just for a friendly cup of tea. Even if the merger talks between the two companies collapsed last year, it is somewhat clear that Microsoft and Yahoo will need each other in one or the other capacity to be able to better compete with Google’s overwhelming market reach. According to Comscore, Google currently holds a search market share of 63.3%, while Yahoo has only 20.6% and Microsoft stands at just 8.2%. Yahoo’s and Microsoft’s market shares have been declining for the past years, while Google’s share is growing every month.

Despite the fact that Microsoft has made substantial investments in its search business and indicated that it will launch the entirely new “Kumo” search engine later this year, Ballmer’s team has not found any effective way to slow Google’s pace. We here at TG Daily believe that a deal between Microsoft and Yahoo is inevitable. The question is simply how long it will take the two companies to figure out a way to work with each other.