After a year of bad blood, Microsoft, Yahoo talking again

WSJ report says CEOs Balmer and Bartz are discussing search and ad deal

Nearly a year after Microsoft Corp.'s fractious takeover bid for Yahoo Inc. fell through, the two companies are reportedly talking business again.

The two companies aren't talking about a merger or buyout but may be talking about a plan for joint search efforts and ways to partner advertising projects, according to Kara Swisher, a blogger for The Wall Street Journal.

Microsoft and Yahoo haven't exactly been the best of friends since takeover talks were abandoned last May, but their mutual rival, Google Inc., may have brought them back together. Just this week, Hitwise, a company that measures online traffic, reported that Google accounted for slightly more than 72% of all online searches conducted in the U.S. during March. In the same time frame, Yahoo Search grabbed 16%, while Microsoft's MSN Search garnered only 5.5%.

"It's in the best interest of both companies to get a partnership together on search," said Dan Olds, principle analyst with the Gabriel Consulting Group. "Google owns about two-thirds of the search market now and isn't showing any signs of losing momentum. Yahoo and Microsoft need to pool their efforts in order to have any chance of blunting Google's rising market share.

And Olds also noted that since Yahoo CEO Carol Bartz wasn't at the helm of the online company during its 2008 struggle with Microsoft, tensions between the two firms may be easing.

"Microsoft's Steve Ballmer isn't shy about letting everyone know that he sees an agreement with Yahoo as a priority," Olds added. "Sort of the old 'the enemy of my enemy is my friend' sort of deal. With Bartz taking over the reins at Yahoo, this should take much of the personal animosity out of the relationship between the two companies and make a relationship much more possible. Both Balmer and Bartz must see the same reality -- Google is running away with the search market. It wouldn't be surprising to see that they will also agree that a joint attack on Google is their best course of action."

Swisher noted in her blog that a "variety of sources" said the talks between Yahoo and Microsoft are preliminary and are covering a wide range of topics. She added that the talks reportedly are not about launching another buyout bid.

Rumors also are swirling this week about Google and Microsoft prowling around after Twitter's search ad revenue potential. With Twitter working to upgrade its real-time search, the two companies may be looking for ways to make some money off of it.

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