Murdoch Adds To Yahoo Ballyhoo

Rupert Murdoch's News Corporation is reportedly poised to join Microsoft in its bid to takeover Yahoo. The talks between News Corporation and Microsoft are hush-hush, but insiders say an eventual deal might see Murdoch chip in some cash for the takeover and hand over his Interactive Media division, which owns MySpace. That could mean MySpace, the MSN network, and the Yahoo search engine would all be owned by the same group.

Yahoo had already been talking with News Corporation themselves, but only in the hope of forming a partnership. They are trying to avoid the type of complete takeover Microsoft is looking for.

If News Corporation does join Microsoft, that's one less option for Yahoo to avoid a buyout. It could also mean Microsoft was able to up its offer, increasing the temptation for shareholders to sell up.

Google is still Yahoo's best hope of avoiding a takeover. When Yahoo and News Corporation last spoke, they considered a deal where they would bring their sites together while outsourcing the advertising to Google. However, antitrust laws mean such a deal would probably be considered unfair.

Yahoo is now considering an advertising deal with Google under which the Yahoo search engine would continue to run independently, but they'd license Google's system for producing adverts relevant to the search phrase. The two firms are running a small-scale test starting this week. Microsoft has pointed out this type of deal would mean Google controlled 90% of search-related advertising and politicians have warned this might fall foul of monopoly laws. (Source: nytimes.com)

To make things even more confusing, there are also rumours Yahoo is in talks with Time Warner for yet another deal. This one would see AOL and Yahoo merge into a new company owned by Yahoo; Time Warner would then pay Yahoo $2 billion for a 20% stake. However, analysts say Yahoo shareholders are unlikely to find such a deal any more attractive than the original Microsoft offer. (Source: reuters.com)

The problem with most of Yahoo's hopeful deals is that they involve Google, which already has such a huge share of the Internet search advertising market. Because of this, it would be difficult for them to tie up with another major firm without breaching competition regulations.

Most analysts still predict that Microsoft will end up simply buying Yahoo outright and it's just a case of them naming the right price.