Yahoo, Google and Microsoft step up battle for web dominance

Apr 10 2008

Yahoo, which recently turned down another Microsoft takeover offer, has become a target of two technology giants and their media allies, it has been reported.

News Corp is considering joining Microsoft in a bid for Yahoo which would create a more formidable rival to Google.

But Yahoo, which plans to test Google search ads alongside Yahoo search services, is close to a deal with Time Warner Inc with its AOL unit.

It follows two years of on-off talks to create mergers among different configurations of the same players.

Google is considered a secondary player unlikely to enter the merger bidding as its growing dominance in web search and search-based advertising could be blocked by competition regulators.

Yahoo would receive cash from Time Warner in exchange for 20 percent of a combined Yahoo-AOL, the source said. Other sources confirmed the outlines of the talks but provided no further details.

The Wall Street Journal cited sources saying Yahoo would use the Time Warner cash and other funds to buy back several billion dollars worth of Yahoo stock at a price somewhere in the middle of the range between $30 and $40 a share.

The New York Times reported that Microsoft had begun talks to bring News Corp in on its effort to acquire Yahoo.

This combination would bring together three of the biggest website publishers on the Internet: Yahoo, Microsoft's MSN and News Corp's MySpace, creating a formidable counterweight to Google, but also drawing antitrust scrutiny.

Yahoo said it was beginning a two-week test on whether it can use Google to sell ads alongside Yahoo Web search services.

Microsoft had threatened on Saturday to launch a hostile bid for Yahoo and could lower its offer in about three weeks if it does not get a deal from Yahoo, which argues it is worth more than Microsoft's $42 billion (£21bn) bid.

Any of the combinations, or another yet to be determined, would fundamentally change the web. Major players have been circling each other as the first decade of growth in the internet market has begun to slow dramatically.

The talks with News Corp, which previously had discussed working with Yahoo as a counter to Microsoft's unsolicited bid, are at a sensitive stage, the New York Times said. The Wall Street Journal called those talks "serious."

Microsoft, News Corp, Time Warner, Google and Yahoo all declined to comment on the talks.