February 28, 2008, 12:00 AM

Microsoft-Yahoo combo would offer search marketing, e-commerce platforms

Although Yahoo Inc. is playing hard to get, Microsoft Corp. says its proposed acquisition of Yahoo would enabled the combined companies to better compete in the growing areas of online video and mobile commerce as well as offer a stronger alternative to Google Inc. in search engine marketing. An acquisition would also open the door for more integration between Microsoft’s e-commerce technology and Yahoo’s Merchant Solutions e-commerce platform.

Microsoft Corp. shot its Cupid’s arrow at Yahoo Inc. last month, launching what it figured was a sweet offer of about $44.6 billion in stock and cash to woo the Internet company into a long-sought marriage, but Yahoo wasn’t impressed. Yahoo’s board shot back that the proposal widely undervalued its position in a market where online advertising, Yahoo’s main source of revenue, is primed to surge.

“The global online advertising market is projected to grow from $45 billion in 2007 to $75 billion in 2010, and we are moving to quickly take advantage of what we see as a unique window of time in the growth-and evolution-of this unique market to build market share and create value for our shareholders,” Yahoo responded.

Alternative to Google?

Microsoft says its acquisition of Yahoo would enable the combined companies to better compete in the growing areas of online video and mobile commerce as well as offer a stronger alternative to Google Inc. in search engine marketing. An acquisition would also open the door for more integration between Microsoft’s e-commerce technology and could also have ramifications for Yahoo’s Merchant Solutions e-commerce platform.

Yahoo contends that its position in the global Internet market is primed to grow substantially without help from its suitor. It notes that Yahoo has more than 500 million users, or one out of every two Internet users worldwide, putting it in a leading position to engage online consumers with its services ranging from online shopping portals and online advertising to personalized web pages and e-mail.

Still, the potential merger of the two Internet technology giants is perking up interest in online marketing and shopping communities. Microsoft and Yahoo are positioned to build out an online marketing platform that could offer marketers a broad spectrum of advertising services that Google doesn’t offer, says Robert Murray, president of search marketing firm iProspect. With Yahoo’s experience and technology in search marketing, and Microsoft’s financial resources and capabilities in software research and development, the two could develop a more comprehensive advertising platform that integrates online display and search marketing ads and lets advertisers bid on both types of ads as a package, Murray says.

Ken Cassar, vice president of industry solutions analytics at Nielsen Online, a unit of the Nielsen Co. that produces research and analysis of web traffic, adds that a combined Microsoft and Yahoo could better compete against the proposed combination of Google and the DoubleClick ad-serving network. “Even though Microsoft and Yahoo have significant audience overlap and a combined search share that would not catch Google’s, they could create the next generation of ad networks-one that rivals Google/Doubleclick-made up of e-mail, search, original content and consumer-generated media, where advertisers could maximize their buys over two of the most trusted online brands,” he says.

Research shows that while Google dominates search traffic, a combined Microsoft and Yahoo would surpass Google in market share of Internet visits, according to Hitwise, a unit of Experian that compiles data on web traffic. “If Microsoft and Yahoo join forces it will be the most important event in the Internet industry this year, without a doubt,” Cassar says.

paul@verticalwebmedia.com

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