February 2008 Monthly Newsletter :: Anduro Marketing
Closing the Gap: Microsoft and Yahoo Tangle in Pursuit of Google
In the past weeks, Anduro has been following Microsoft’s recent and persistent efforts to purchase search engine giant Yahoo. After making an initial and unsolicited bid valued at $44.6 billion, Microsoft’s advances were spurned by Yahoo on the grounds that the $31-per-share offer was too low. The fact that Microsoft was so desperate to acquire Yahoo despite its flagging share prices left many speculating as to the rival companies’ reasoning behind their respective decisions.
It seems clear that both companies, particularly Microsoft, are feeling pressured to catch up with their competitors at Google, who have dominated the search engine market for the better part of a decade. Now more than ever, with the likelihood that the industry will continue to grow over the next decade, Yahoo and Microsoft are pulling out all the stops to maximize their value within that window.
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Yahoo first unveiled its new Panama online advertising platform, which offers an updated page ranking system, in late 2006. The company had hoped that it would have a rejuvenating effect on stock prices that had fallen commensurate to Yahoo’s decreasing share of search ad revenue. In fact, Yahoo’s perceived stagnation one year ago spurred talks between the two companies of a possible merger or joint venture of some kind. Similar to Google’s system, it uses an algorithm based on click-through rates as well as keyword bids that pares down non-relevant search results over time. This more advanced and more accurate system of delivering search engine results combined with a dashboard that advertisers can use to monitor the effectiveness of their campaign may indeed benefit Yahoo in the long-run. However, it still seems to suggest that Yahoo is playing catch-up with Google in the search advertising market. Interestingly, the Yahoo homepage is the most visited webpage in the world, while Google’s isn’t even a consistent second. But this clearly has more to do with Yahoo’s value as a web portal than its search engine capabilities. Google has remained a no-frills searching machine.
Microsoft’s efforts have been less about exploiting its own upside than acquiring Yahoo’s, which makes sense considering that Yahoo ranks second in searches, albeit a distant second, while Microsoft's MSN is third. Yahoo CEO and cofounder Jerry Yang is reportedly of the mind that any potential his company may still possess outweighs Microsoft’s 62% premium on its February 1 closing share price of $19.18. Even while Microsoft considers attempting a hostile takeover, Yahoo has turned to News Corp. to discuss hammering out a joint venture between Yahoo’s search engine/web portal and Fox Interactive Media, of which MySpace is a property. Reports are that Yahoo is aiming for a deal that would bring the company’s net worth closer to $50 billion, as opposed to Microsoft’s $44.6 billion bid.
And where else has Yahoo allegedly turned to realize its full potential? An advertising partnership with Google, of course.
It remains to be seen what efforts Yahoo and Microsoft undertake in their respective bids to accede the mantle of search engine preeminence now held by Google, and how successful those efforts prove to be.
This has been the latest in Anduro’s continuing efforts to follow business and marketing trends that may affect our clients as they develop.
SPECIAL NOTICE: We would like to remind our clients and friends that CCAT will be hosting two events in the month of March: on March 5, a breakfast discussion of the role of genomics in a bio-based economy, and on March 19, an exclusive, can't-miss event featuring Sun Microsystem's Michelle Dennedy! We encourage all Calgary entrepreneurs to attend these exciting events.
For more information on any of the products available from Anduro Marketing, contact us at info@anduro.com or (403) 410-3803.
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