Yahoo and MSN back in talks – Google looks on

MSN and Yahoo! are back in talks.  You’ll remember that MSN approached Yahoo! with a $40 billion evaluation which was later sweetened by $7.5 billion. On refusal Carl ICahn started getting vocal with his 4% of Yahoo! and a threat to depose 10 of Yahoo’s directors.

Google are in the sidelines watching as the number 2 and 3 in the market (leaving Yandex out of European figures for the moment) disuss becoming a possible number 2 with a third of search market share. something not to be sneezed at with the value of search valued at about $40 billion per annum and set to double by 2010.

It’s certainly all to play for. The test of Google adsense being used in a percentage of Yahoo’s paid search ads last month has attracted the anti trust boys so the previous avenue of a commercial agreement which would see Yahoo as inventory for Google sales looks like its being put on the back burner.

Where will it all end? Without Yahoo, MSN will struggle to grow or even to maintain marketshare with their search offering being so limited in comparison to the products offered by the other two goliaths. Will MSN pursue the social media route instead with it’s proposed talks with Facebook.

Exciting stuff.

Yahoo & Google put one in the eye to MSN

The search giants are slugging it out and the action is heating up! Yahoo! has just announced that it will test the serving of Google Adsense on its Yahoo.com domain (reportedly 3% of US served results over 2 weeks).

The story so far

This is after a bitter exchange of letters between MSN and Yahoo! on MSN’s offer ($31 per share) for Yahoo! which was rejected as completely undervaluing the company’s worth. At the weekend MSN wrote a letter to Yahoo!’s board which expressed disappointment at the company’s failure to move on the offer and accusing them of being unfair to shareholders. Yahoo! replied with a letter that between the lines calls Microsoft disingenuous, predatory and expecting to pick up the Yahoo! brand at a drop down price.

Who to please – the searcher vs the advertiser

Yahoo!’s fortunes have been mixed, the brand was the search colossus, but while Google concetrated on refining its algorithm around relevancy, it can be argued that Yahoo! focused on portal content, building communities and advertising revenue. Google with its market dominance has in recent years turned its attention to community and web 2.0 through a mixture of acquisition and creation of easy to use, free tools ( google docs, igoogle, blogger, youtube). In simple terms Google’s eye was on pleasing the audience, Yahoo!’s was more traditional and on pleasing the advertiser; and Google’s focus won out.

Future Search Market Share

The time for a Google merger with Yahoo! is long since past. Together they would take about 81% of the US search market. MSN has about 9%; a Yahoo! buyout would give them around 31%. You can see why MSN is keen.

What are Yahoo!’s tactics? Running Google Adsense across Yahoo! platfroms and networks could net the company billions. Is this the plan or are they sticking it to Microsoft to get a better price for shareholders.

It’s like Wargames for search. Nobody wants to have limited choice but Google’s offering is so compelling and MSN has never lived up to it’s search promise with dancing algorithms and limited market penetration. Yahoo! on the other hand is a much loved brand and many in the search industry are rooting for it’s survival intact and ready to fight another day.