Carol Bartz's "Gut" Tells Her Not To Do Microsoft Search Deal (YHOO)

The Microsoft-Yahoo search deal might not be as imminent as hoped.

A source told the WSJ that Yahoo (YHOO) directors don’t feel “there’s any pressure at all,” to get the Microsoft (MSFT) deal done soon. They say that though new Yahoo CEO Carol Bartz has spoken to Microsoft CEO Steve Ballmer since taking the Yahoo gig, the conversation was entirely casual. 

During her first company-wide meeting yesterday, new Yahoo CEO Carol Bartz told employees her “gut” was telling her not to sell Yahoo’s search business to Microsoft.

We hope Carol was just trying to keep employee morale high, because otherwise she’s listening to the wrong organ. If she and Yahoo directors were listening to their brains, they’d feel lots of “pressure” to do a deal now.

A couple signs that the pressure should be mounting:

  • Yahoo’s top search advertiser makes its money selling Google ads — as clear an indication as any that there’s a huge gap between the bids that are winning keyword auctions at Yahoo and the ones winning keywords at Google.
  • One the main reason that happens is because Yahoo has so many fewer bidders competing for keywords. In fact, Yahoo’s share of all search advertisers dropped 36% in Q4.

A quick way to fix both problems would be to add more bidders to Yahoo’s auction. A quick way to do that is to combine Microsoft and Yahoo search.

Microsoft CEO Steve Ballmer put it best in early December:

“Would it be advantageous for both of us to make a deal? Look, the fundamental basis for doing the search deal with Yahoo has to do with critical mass in the advertising marketplace. It doesn’t have to do with technology, or any of these other things, it really is a market phenomenon. Together we would have more advertisers….which means we’d have more relevant ads on our page. We’d have higher monetization levels possible in front of us because there would be more people bidding on more key words. Most importantly, Google would have perhaps a real credible competitor sooner.”

See Also:
Bartz’s Greatest Hits (YHOO)

Bartz: “Tell Me Why I Shouldn’t Fire The Whole Lot Of You”


NOW WATCH: Tech Insider videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at