Microsoft (NSDQ: MSFT) has made a $44.6 billion (£22.4 billion) offer for Yahoo (NSDQ: YHOO) (see paidContent.org coverage and release) at a time when the Sunnyvale portal is due to axe several services in Europe. We know shopping comparison service Kelkoo is likely to be chopped – UK MD Glen Drury told us in September Yahoo was re-thinking the site and European head Toby Coppel warned underperforming sites in his patch would be shut in Q1 if they can’t be turned around.
Yahoo doesn’t break out earnings by region so it’s difficult to work out its performance here. The company in London was unable to confirm what stage that process is at and is nervously treating all calls “with caution” today.
– Search: Though uniting would begin to pose a greater challenge to Google (NSDQ: GOOG) in search, even their combined share of the UK search market would still barely make a dent against the leader. Microsoft took only 3.7 percent share of UK searches in December and Yahoo 4.7 percent, comScore (NSDQ: SCOR) told paidContent:UK – a combined 8.4 percent against Google’s overwhelming 73.8 percent would still leave MSFT-YHOO a mountain to climb in search. It’s even worse across Europe as a whole – Microsoft and Yahoo tying on two percent against Google’s 82 percent.
– Ads: But a takeover would give Microsoft considerably more influence in advertising. MS already runs UK display advertising for Facebook while Bebo, which is particularly well loved by UK and Irish teens, outsourced its ad operation to Yahoo in September. That would give the pair control of two of the big three networks, with Google handling the account for MySpace. Yahoo rolled out its Panama platform to search ad clients in Europe in May and, after years of languishing on technology inherited from Overture while Google motored ahead, now finds its client offering more enviable than Microsoft’s. But, while AdSense continues to serve up ads to publishers keen to monetise their sites, Yahoo Publisher Network still hasn’t launched on these shores. A combined offering in that space would offer a challenge to the incumbent – if only they could hasten its arrival.
– Staff: Yahoo has lost several high-profile staff in recent months. UK commercial director Blake Chandlee went to Facebook in October, supposedly having taken Stephen Haines and Jon Harvey with him. European search VP Stephen Taylor quit in September. European product operations director Robin Pembrooke left for GCap in July. Dominique Vidal was swapped at the top of the European operation for Coppel in April.
– Markets: One positive spinoff from the offer – shares are up. The FTSE 100 rose over two percent to break the 6,000-point mark by lunchtime. “Investors are throwing themselves in after positive news that gives them a reason to buy equities,” one trader told Reuters.
– Regulation: Remember that the heavily pro-consumer European Commission last year fined Microsoft £340 million for antritrust violations and forced Apple (NSDQ: AAPL), too, to lower iTunes prices. It’s currently poring over the merger proposal from Reuters (NSDQ: RTRSY) and Thomson (NYSE: TOC). For an indication as to how a MSFT-YHOO proposal might be met, consider that Reuters and Thomson pledge their deal is not anticompetitive as they will merely be competing with the larger Bloomberg. This, too, would be a case of two rivals uniting against a larger foe. “It’s up to Microsoft to verify whether or not it needs to notify us,” an EC antitrust spokesman told ZDnet.