Well Goohoo has been and gone. Google stepped out of the deal due to the restrictions Yahoo! were trying to apply. Yahoo! understandably doesn’t want to lose out to it’s biggest (winning) rival after all.

Jerry Yang, CEO of Yahoo! seems to have re-offered Yahoo! to Microsoft. For those not in the know, Microsoft attempted to purchase Yahoo! earlier this year. They couldn’t agree on figures and Microsoft eventually slammed the door. Now Yahoo! has gone back with the lost puppy look and is waiting for Microsoft (or another bidder) to throw them a bone.

The current search share of the engines looks something like below:

Over the past two years, Google has gone from strength to strength, Yahoo! is it’s next biggest competitor closely followed by Microsoft and Ask. If Microsoft did acquire Yahoo!, it would significantly increase the muscle behind the defence against Google but would still have to claim around 20% more of the market share to rival Google.

Microsoft have the advantage of being able to set live search to default on their own software, however their street cred isn’t great and users are converting to Mozilla Firefox (which defaults to Google) and Google’s own browser, Chrome (never guess which search engine they favour)

So how can Microsoft gain it’s software advantage? They need to fix Internet Explorer, make it follow the same web standards as Firefox. They may have another plan up their sleeves however…

Hotmail users on Chrome will be familiar with the message ‘We don’t support your browser upgrade to IE’ Everything worked regardless so it was just an annoyance. Microsoft have just upgraded Hotmail and low and behold removed the annoying message! However Google Chrome users are now unable to send/reply to messages due to a faulty Javascript editor… Even despite Wikipedia reporting the roll-out to Chrome on the 4th November 2008. Is this a simple oversight or was there some Malice in the decision to not support Chrome? Some Firefox 3 users have also reported problems.

I don’t like the idea of Microsoft buying Yahoo! however I think Google needs some decent competition! Their staff live in cushy offices with massage chairs, slides, poles and all sorts of games! It employs 20,123 members of staff and pays for them to relax! They need to be put to work to stay ahead of the possible Microhoo! conglomeration!

The Wall Street Journal reported yesterday that Microsoft executives have met representatives of Time Warner Inc. (Owners of AOL) suggesting that Microsoft had a plan B from Yahoo’s failed buyout. Microsoft Live Search has been trying to compete with Google for some time and seem to have decided they need people with experience to make it successful.

With Google’s possible move to controlling Yahoo’s advertising stream, Microsoft has become a little worried about the overall outcome. AOL hold approximately 11% of the US advertising market matching Live Search’s 11% according to eMarketer.

AOL’s current advertising is already managed by Google, it is unclear how long this deal would be honoured for if any deal took place, or even what would happen to businesses using adwords to advertise on AOL. Whether or not it goes ahead, we can only speculate.

What would be Microsofts benefit to buying AOL? Microsoft would increase it’s online services, particularly in the social networking scene. They would obtain TMZ, AOL’s celebrity gossip site, AOL’s Bebo, several online display advertising networks like advertising.com and tacoda.com. In terms of unique users, they would effectively become larger than Google, the current industry leader.

“It’s a deal worth doing” at a reasonable price, said

Charles Di Bona, an analyst with Bernstein Research. “It would bring some search and some significant display advertising assets.” Bernstein’s parent company, Alliance Bernstein, owns shares in both Microsoft and Time Warner.AOL’s advertising business is worth somewhere around£4.4bn according to J.P. Morgan. In contrast, Bear Stearns values it at nearer £7 billion.

Following Microsoft’s failed bid to buy Yahoo!, a deal is underway for Google to gain control over Yahoo’s search advertising. Presumably this means that Google adwords will spread to Yahoo! increasing coverage while removing choice. With Google taking over 90% of the internet advertising revenue, this would certainly impact on Microsoft’s Live Search wallets, but could wipe out existing smaller search engines and any future competition Google could ever have.

It would also affect smaller businesses in terms of getting a competitive deal on online advertising as the choices would be removed, prices could go up, the smaller voices would be muffled, and advertisers would have nowhere else to turn.

Yahoo! anticipates additional revenue from the deal, presumably Google will do too (else why make the deal) and all this extra cash is coming from somewhere.

Microsoft is making noises, they’ve been in court for similar practices with Micrsoft Windows Monopoly and now they want their own back. There are talks from their corner of price-fixing similar to the UK’s big supermarket agreements where minimum prices are set further hitting the smaller businesses. Microsoft’s best move now would be to file an antitrust lawsuit through the US Justice Department as happened to them prior to 2002 when the case was settled.

As there’s no merger, the Google Yahoo! partnership (hereafter known as Goohoo!) would not need to go through the US Justice dept. but they can challenge the agreement if it’s shown that competition would be stifled.

Goohoo! have agreed to give the deal a 2 1/2 month for the dust to settle and to back out if Yahoo! is ever bought. (Perhaps a collaborative effort to push Microsoft towards a higher bid?) They also deny any claims of potential price fixing and minimum ad costs.

Good idea? Bad idea? Your views and comments are welcome: