Yahoo!, Google, and AOL vs. Microsoft and Newscorp.?
In the two months since Microsoft first made an unsolicited $44.6 billion bid for Yahoo!, much speculation has been circulating about how the deal will play out. The rumor mill is churning today, as several new developments have arisen. Yahoo! is allowing Google to post ads on its site, while Rupert Murdock’s Newscorp. is approaching Microsoft about a possible joint offer for the beleaguered internet search company. How will this all play out? It seems that every one in the industry has an opinion, and the news coverage has been fast and furious.
First, BBC News is reporting that Google and Yahoo! have struck a deal to test a new advertising strategy together. For two weeks, they will share advertising space on the websites they operate. Google will be allowed to display ads on 3% of Yahoo! search results pages, in an attempt to thwart Microsoft’s takeover. The strategy could force Microsoft to pay more for Yahoo!, as shareholders and company executives have complained that the initial offer undervalued the company’s true worth. Indeed, Yahoo! shares rose 7% in reaction to the advertising plan. The experiment is temporary and not indicative of a permanent relationship with Google.
Yahoo!’s talks with AOL, however, are of a more substantial nature. As a recent Wall Street Journal article explains, “Yahoo Inc. and Time Warner Inc.’s AOL are closing in on a deal to combine their Internet operations, a move aimed at thwarting Microsoft Corp.’s effort to acquire Yahoo.” Time Warner would merge AOL’s web portal into Yahoo!, though not its ISP dial-up service. The deal would give Yahoo! some capital with which to buy back shares from investors, strengthening their position against Microsoft.
On the other side of the negotiation table, Microsoft and Newscorp. are rumored to be discussion a possible joint offer for Yahoo!. This deal could leave Yahoo! with no champions to help them escape Microsoft’s grasp. As the New York Times puts it, “The combination, which would join Yahoo, Microsoft’s MSN and News Corporation’s MySpace, would create a behemoth that would upend the Internet landscape.” The possible deal between Microsoft and Newscorp. would give Ballmer the option of raising his offer for Yahoo! in the face of their rising share prices.
All these deals boggle the mind, and it’s very hard for consumers to know exactly how the various talks might affect them. Everyone likes an underdog, and it’s sad to see Yahoo! scrambling to raise their profile, but the business has been struggling for years in the face of stiff search competition. A deal with Microsoft, Newscorp., and Yahoo! would combine three of the most popular websites in the world. Microsoft has not yet announced its plans for Yahoo!’s brand should the deal proceed, but it seems clear that the executives at Yahoo! are desperate to avoid finding out. Most analysts agree that if Newscorp. and Microsoft make a joint offer, there’s little hope for Yahoo!’s continued resistance.
By Haley January Eckels
