Yahoo! and Microsoft -- The Beat Goes On

There seems to be some life in Yahoo! after all, although the jury's out as to what end.  Microsoft gave the company a three week deadline to accept its buyout offer otherwise face a proxy fight and a lower offer.  That was to scare the shareholders into pressuring Yahoo!.  Microsoft is tired of dancing and wants to get to the altar, especially on its terms.  Yahoo! tried to get other partners such as News Corp. and AOL involved, but the intrigue never went anywhere to create a viable alternative to the Microsoft offer. 

Now Yahoo! announced a test where Google will supply some 3% of ads on Yahoo! properties as part of a short-term test to see whether Yahoo! can get a combination of lower costs and higher shared revenue with their rival.  Microsoft is not pleased.  For its part, MS offered to work with News Corp. to trade MySpace for parts of Yahoo! in a joint management of Internet properties.  Financial analysts suggest that this may be a way to bring more financing to raise the bid, if necessary.  Yahoo! on the other hand is renewing talks with Warner Communications for some type of combination with AOL.  Warner would be thrilled to get rid of AOL as most consider the combination of Warner and AOL to be a failure.  AOL is not particularly a company on the upswing.  Whether the stockholders go for this combination is open question.  If nothing else, it is a way for Yahoo! to force Microsoft to raise its bid.  Incentive is everything in these things.

Then, there are the average everyday users.  No one has asked them if they will still blindly use Yahoo! if it were part of Microsoft.  You have to wonder if some people use Yahoo! because it's not Microsoft (or Google, or AOL, etc.) and would they re-evaluate their patronage if the site were under new management.  I mean, if Hotmail is that great, why aren't more people using it? 

Most analysts expect Microsoft to get their way, but at a higher price.  Someone (including me) is going to be smirking if Google is making money from ads supplied to a Microsoft owned Yahoo!.  The nerve of Yahoo!, acting as if it were an independent company making independent business decisions. 

More on this in Bloomberg, the International Herald Tribune, Reuters, and in one of the many nice pieces at CNET focusing on employee morale in light of all these deals.