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Yahoo, Microsoft zeroing in on deal

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Steve Chiotakis: We’re hearing this morning there’s a deal between Microsoft and Yahoo. It’s reportedly an Internet search partnership aimed squarely at Google, which has a behemoth share of the online advertising market. Details are expected to be announced today.

Kara Swisher writes a blog for the Dow Jones site All Things Digital. She’s been breaking some of the details this morning and she joins us now. Hi, Kara.

Kara Swisher: Hi, how you doing?

Chiotakis: Doing well. What exactly would this do?

Swisher: Well, they would — Yahoo would sell search advertising for its own sites and also Microsoft sites, and essentially Microsoft would be the technology underlying it. Yahoo is much stronger in the advertising arena and Microsoft isn’t, and so they’re trying to use their strengths to try to compliment each other.

Chiotakis: This back-and-forth, Kara, has been going on for a long time. What was the spark here?

Swisher: Well you know, both Microsoft and Yahoo have been in various talks over the years. There was a hostile takeover attempt by Microsoft by Yahoo that didn’t work out. As they struggled with each other and the larger search market, Google has become this massively important search company with most of the share.

Chiotakis: And how significant a challenge will this pose to Google?

Swisher: Well, Google’s still over 60 percent and this combination creates a 30 percent market share. It’s still not going to be, Google’s not going to lose all the market share it has. Google has huge advantages because of its scale, and it’s hard to turn that around, as everybody knows, from Microsoft and the operating system business. So it at least gets them in the game, and that’s what advertisers need — they need the scale so that they will advertise on it, and that’s what’s most important.

Chiotakis: So Kara, what do you think Wall Street’s going to say about this deal?

Swisher: Well, Wall Street’s anticipating probably, from what I understand, it’s a much smaller deal. I think everyone knows this was moving slowly towards being finished, and now we’ll see how they perform.

Chiotakis: All right. Kara Swisher’s an editor and she writes a blog over at All Things Digital. Kara, thanks.

Swisher: Thanks a lot.

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