Sun, Apr 12, 2009 - Page 11 News List

Yahoo, Microsoft may be weighing ad deal to run spots on each other’s sites

NY TIMES NEWS SERVICE

Yahoo and Microsoft, which held a protracted series of fruitless merger and partnership negotiations last year, have restarted discussions, this time over a possible advertising agreement, a person briefed on those discussions said on Friday.

Conversations between the two sides have been scant since Carol Bartz was named Yahoo’s chief executive in January.

MEETINGS

But they have started anew recently, and Bartz met with Steven Ballmer, Microsoft’s chief executive, last week, said the person briefed on the discussions, who only agreed to speak on condition of anonymity because the talks were confidential.

Yahoo and Microsoft declined to comment.

The discussions are in the early stages and may not lead to any agreement, the person said.

They have centered on ways for the companies to pool their advertising efforts, including a possible partnership under which Microsoft would sell search ads for Yahoo, and Yahoo, in turn, would sell display ads on Microsoft properties, this person said.

GOOGLE

After merger and partnership talks collapsed last year, Microsoft continued to make sizable investments in its search business to compete better with Google.

Those investments included the hiring of a string of top search executives and engineers, some of whom had previously worked at Yahoo, including Qi Lu (陸奇), a well-regarded technologist who took charge of Microsoft’s overall online business, including search.

Microsoft is expected to release the results of its latest research and development efforts in search technology this summer when it plans to introduce a major overhaul of its search engine.

Microsoft executives are enthusiastic about the capabilities of the new service.

But they readily admit that it does not address one of the principal challenges the company faces in competing with Google: Microsoft’s audience and its base of advertisers are tiny compared with Google’s.

COMPETITOR

That makes Microsoft’s search business, in which advertisers bid against one another in an auction, less lucrative than Google’s.

A partnership that would pool Microsoft’s and Yahoo’s users or advertisers could go a long way toward addressing that problem, and could help create a more powerful No. 2 competitor to Google in search.

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