Microsoft-Yahoo Combo Would Still Be Search Laggard

Google's share of the Internet search market is more than double that of its two closest competitors -- and growing.



Microsoft has reportedly renewed talks aimed at forging an alliance with Internet rival Yahoo, with possibilities ranging from a display advertising partnership to an arrangement that would see Microsoft outsource search to Yahoo, though an outright buyout of Yahoo by Microsoft no longer appears to be in the cards.

But the most recent data shows that, even combined, Microsoft and Yahoo would still significantly trail Google in the all-important multibillion-dollar search market -- raising the question of whether such a partnership would be worth it.

As of February, Google held 63.3% of the U.S. search market, up from 63% the previous month. Yahoo's share fell 0.4%, to 20.6%, while Microsoft's share declined 0.3% to 8.2%, according to research firm ComScore. In other words, Microsoft and Yahoo's combined share of the search market isn't even equal to half of Google's total share. What's more, Microsoft and Yahoo are continuing to lose ground against the market leader.

Google's dominance of the search market is so complete that even if Microsoft were to partner not only with Yahoo, but with the other two of the top five search players -- AOL and Ask Networks -- its aggregate share would still only come to 36.7% of the market, ComScore's data shows.

Still, as recently as last month, Microsoft CEO Steve Ballmer said that he remains interested in acquiring Yahoo's Internet search and advertising unit. "Over time, there's still a good opportunity to do a deal," Ballmer said during a March 19 media summit in New York City.

Ballmer's remarks reinforced comments made in January by Yahoo CEO Carol Bartz, who replaced Jerry Yang atop the company earlier this year, indicating a Microsoft-Yahoo deal might still be on the table. Bartz told her employees that she would investigate whether a sale of Yahoo's search business made sense.

Adding to speculation that Microsoft is still intent on integrating Yahoo's search operations is the company's December hiring of Qi Lu, who was Yahoo's engineering VP for search and advertising technology. Microsoft named Lu head of its online services unit.

Microsoft last year offered to purchase Yahoo for $31 per share, but talks between the companies ultimately broke off amid growing animosity between Ballmer and then Yahoo CEO Yang.


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