I wonder how serious Yahoo was when they re-initiated partnership talks with Microsoft… cause just hours after the official calling off of talks with Microsoft, Yahoo announced a partnership with Google to host and display Google’s Adwords ads on its search engine result pages.

Is that good? Well, for Yahoo it is. Cause Google Adwords is much more popular than Yahoo’s search marketing program. Google Adwords Ads are also more expensive per click than Yahoo ads were. This means that Yahoo may get more revenue per click than their own program was able to generate.

For advertisers, the positive is that Adwords will now be able to give them a much wider audience. On the flip side, the deal makes Google a virtual monopoly in the paid search advertising (popularly known as pay per click) arena.

Again… I think this hasn’t ended and there is more to come! Stay tuned…

In line with my expectations (ref. to my blog post on May 4th 2008 – Microsoft walks away from Yahoo deal) that walking away from the deal was just a temporary ploy adopted by Microsoft, major news papers have today reported that Yahoo and Microsoft have resumed talks in the wake of a shareholder rebellion launched by billionaire investor Carl Icahn.

However, this time the discussions are focusing on a deal short of outright acquisition. Microsoft announced the discussions in a brief statement that it made on Sunday.

The press reported that Microsoft was proposing an arrangement focused only on Yahoo’s search advertising business.

Makes sense doesn’t it? They need to compete with Google and its Adwords program and Microsoft’s Adcenter isn’t really doing too well.

Well, I guess it promises to be a long, exciting and complicated battle, but I still week Microsoft may get Yahoo in the end.

With Microsoft announcing that it no longer wishes to persue the acquisition of Yahoo, what promised to be the year’s most talked about blockbuster deal may have ended in a little more than a whimper. But… has it really ended or is it a ploy by Microsoft to wait till the Yahoo stock plunges and then rebid at a lower price?

If major newswires are to be believed, at Yahoo, Jerry Yang is most likely to face several angry share holders who believed that he should have accepted Microsoft’s offer. On his part, Jerry Yang has been quoted as saying, “with the distraction of Microsoft’s unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history”. I wonder what that transition is?

From a paid search advertising perspective one only hopes that they improve their own offering instead of selling out to Google’s Adwords program. If they do decide to tie up with Google, then Google Adwords will have a virtual monopoly in the paid search advertising space and that would be quite sad.

Whatever it is that ultimately happens… the future promises to be interesting!!!

There’s a been a buzz since months now, but Microsoft finally officially announced an unsolicited $44.6 billion bid for Yahoo. The $31-a-share bid of cash or Microsoft stock is 62 percent more than Yahoo’s closing price yesterday, reports bloomberg.

So how does this change the search equation?

Google, based in Mountain View, California, captured 56 percent of U.S. Web queries in December, almost double the combined share for Yahoo and Microsoft, which attracted 18 percent and 13 percent. Searches will account for 37 percent of the $27.5 billion U.S. online advertising market in 2008, estimates research firm EMarketer Inc.

Both Yahoo and MSN have been continually losing market share to Google in the search space (both paid and organic). This can be confirmed by looking at Yahoo’s quarterly balance sheet, which shows 8 straight quarters of declining profits. Now, the combined force of Yahoo & MSN, may just be able to start regaining market share that they’ve lost to Google. However, today Google’s search engine is far superior to both Yahoo’s and MSN and they need to be able to offer a compelling reason for users to switch over.

Going back a few years in history, when Altavista and then Yahoo dominated search. In came Google with its cleaner interface, faster search query processing and more accurate results. Today, I see no reason for Google users to switch to any other search engine  simply because there is no value addition that any other search engine can provide. And this is something that Microsoft needs to address if they manage to take over Yahoo… otherwise it may just end up being another hotmail, which only lost marketshare and became one of the more marginal players in the email space after the Microsoft takeover.