Microsoft Looking to Buy Yahoo?

Rumors of Microsoft looking to acquire Internet giant Yahoo have come and gone several times over the last few years; however, now the New York Post and the Wall Street Journal are both reporting the companies are currently engages in acquisition talks. According to the New York Post, Microsoft offered $50 billion to take over Yahoo; although Yahoo turned down the offer, talks are continuing. According to the Wall Street Journal, merger or partnership talks between the two companies are at an early stage.

Any renewed negotiations between Microsoft and Yahoo are a sure confirmation of the market momentum of Google, which has not only managed to capture the bulk of the online search marketplace, but convert that dominant position into a very lucrative online advertising business—augmented by it’s just-announced acquisition of DoubleClick. And, of course, Google is rapidly expanding out into other areas, including (but not limited to) desktop software, mobile phone offers, mapping products (a la Google Maps and Google Earth), email, its somewhat infamous Google Books project, blogging software, and, of course, online video with its recent acquisition of YouTube. Google is even starting to challenge Microsoft’s flagship Office productivity software, offering basic online productivity applications for word processing, spreadsheet, calendaring, and Web page creation tools.

Although both Yahoo and Microsoft offer Internet services which compete with essentially all of Googles’s offerings—and in some cases go beyond them—both companies have been struggling to make their products compete against Google in terms of overall usership and, of course, the amount of advertising and partnership revenue the products can create. Although a merger between Yahoo and Microsoft would undoubtedly raise a number of political and regulatory concerns, it would give Microsoft a much firmer foundation on which to compete with Google for online service and advertising revenues.