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May 4, 2007

Microsoft, Yahoo Re-enter Merger Talks

With the heat around digital media and technology, one must assume everyone's in M&A "talks" of one kind or another. Now and then, the press gets wind of it and a wave of speculation ensues. As often as not, it all dies down again and we collectively move on.

That said, a merger between Microsoft and Yahoo would obviously be a huge development; Google-DoubleClick would be insignificant by comparison.

Reports this morning from WSJ and NY Post mention the negotiations, and suggest Microsoft is driving them. This happened once before (that we know of), a year ago, when the companies explored the possible benefits of teaming up.

I'm no financial expert, but there are many reasons talks might not advance. Neither Yahoo nor Microsoft believes at its core that it has as much to fear from Google as many outsiders are telling it. Search market share is a big concern for both companies, yes, and if a merger did take place, the combined entity would have a market share around 30 percent -- kind of sad when you think about it. But display adveritsing is growing faster than search, and Yahoo strongly believes it's positioned well to benefit from a pendulum swing back to brand advertising. And Microsoft's very confident in its ability to innovate around platforms and applications, even as it struggles to convince marketers it knows how to serve them.

ClickZ will stay tuned of course, but let's remember that talks are just talks.

Posted by Zachary Rodgers at May 4, 2007 10:04 AM

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