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Rumors of Microsoft-Yahoo Collaboration

Posted by Melanie Phung on Saturday, May 6, 2006 at 5:15 pm

Microsoft and Yahoo have been holding clandestine talks about teaming up to challenge Google, according to a leaked memo. Despite launching and then relaunching and then half-launching/renaming their search engine, and many months worth of saber rattling, is Microsoft conceding defeat, admitting that it has no hope of beating Google in the search game by itself?

The WSJ reports, that there are two factions within Microsoft — those who think Microsoft should build their search empire themselves, and those who think it makes more sense to buy something. And who better than Yahoo (certainly the AOL thing wouldn’t have done the trick) — Yahoo is the #2 search company, with lots of traffic and a search engine that actually presents decent results.

Search Engine Watch’s Danny Sullivan says:

The Wall Street Journal cites the hiring of Steve Berkowitz by Microsoft as perhaps being a tipping point. I’d certainly agree. Steve is the first serious outside person Microsoft has brought in for its battle in the search wars. Bringing him on was a big sign that what Microsoft has been trying to do internally hasn’t been working — and so something radical such as an Ask or Yahoo acquisition might be in order.

According to WebProNews, “Yahoo has its improved search advertising relevance algorithms in testing with ‘Project Panama.’ Sometime soon, Yahoo may bring Panama in from the cold of Scandinavia, and test it in the United Kingdom this summer.” And Microsoft has been putting its energies into paid search to rival Yahoo/Overture and Google.

“Ballmer told Microsoft’s employees that the company would make ‘heavy investments’ in Internet search. “[O]ur goal is to create the Web’s largest advertising network, giving us an engine that will enable us to monetize our services and compete against Google,’ Ballmer wrote.”

So all that bravado from Gates about taking down Google, then, appears to have been borne not out of confidence in its technology innovations, but rather possible aquisitions. Or so it looks to me.

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