The latest talks between the companies centered around Yahoo selling its search technology to Microsoft. As was expected by some, Yahoo did not want to part with technology it considers essential to its future.
What is perhaps most interesting about the talks breaking down is that it shows Microsoft places little value on display ads and page views as compared to search technology. This means Microsoft likely thinks search ads are really more valuable than display eyeballs.
It will be very interesting to see if the frenzy over search ads is not just a part of the natural change that comes into the advertising market from time to time. Apparently Microsoft thinks search is a real game changer and perhaps always will be.
It is worth pointing out that history shows virtually everything is more cyclical than you first think.
Here is an excerpt from a press release the company recently issued:
SUNNYVALE, Calif., Jun 12, 2008 (BUSINESS WIRE) -- Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, today announced that discussions with Microsoft regarding a potential transaction -- whether for an acquisition of all of Yahoo! or a partial acquisition -- have concluded. The conclusion of discussions follows numerous meetings and conversations with Microsoft regarding a number of transaction alternatives, including a meeting between Yahoo! and Microsoft on June 8th in which Chairman Roy Bostock and other independent Board members from Yahoo! participated. At that meeting, Microsoft representatives stated unequivocally that Microsoft is not interested in pursuing an acquisition of all of Yahoo!, even at the price range it had previously suggested.
With respect to an acquisition of Yahoo!'s search business alone that Microsoft had proposed, Yahoo!'s Board of Directors has determined, after careful evaluation, that such a transaction would not be consistent with the company's view of the converging search and display marketplaces, would leave the company without an independent search business that it views as critical to its strategic future and would not be in the best interests of Yahoo! stockholders.
Yahoo! remains focused on maximizing value for stockholders by continuing to execute on its strategy of being the "starting point" for the most consumers on the Internet and a "must buy" for advertisers. The online advertising industry is projected to grow from $40 billion in 2007 to approximately $75 billion in 2010 and the company believes it has the right assets, strategic plan, Board of Directors and management team to capitalize on this growth opportunity.