Yahoo CEO Yang reaches out to Microsoft's Ballmer

Yahoo Inc. CEO Jerry Yang publicly turned to Microsoft Corp. for help last week, just hours after Google Inc. walked away from a proposed search advertising partnership with his company.

Speaking at the Web 2.0 Summit in San Francisco, Yang said that Microsoft CEO Steve Ballmer can just say the word and he will begin negotiating the sale of his company. "I would say that the best thing for Microsoft to do is to buy Yahoo," he said.

In fact, Yang said Yahoo is willing to sell itself for less than the Microsoft offer it rejected last spring.

Yang's move was prompted by Google's announcement that it's abandoning plans to run Google advertisements on Yahoo search results pages. Google said that constant wrangling with advertising groups and government regulators over whether the deal violated antitrust laws was not in the company's best interests.

When plans for the partnership were announced in June, Yahoo projected that the deal would generate $250 million to $450 million during the first year, and up to $800 million annually thereafter.

The financial boost would have come at a good time for Yahoo, which is now cutting costs by laying off 10% of its workforce.

Some industry observers maintain that Google's decision gives Yahoo no choice but to sell itself to a company like Microsoft or AOL LLC.

"The company was very much relying on the Google deal to stabilize its financial condition," said Mike Masnick, president and CEO of IT research firm Floor64 Inc., on Floor64's Techdirt blog site. "Without that, Yahoo is in trouble."

However, David Card, an analyst at Forrester Research Inc., contended that Yahoo can still survive -- and perhaps thrive -- on its own. He said Yahoo has created a large and loyal audience through the years and has "done a pretty good job of selling advertising."

Noting that the company has also successfully added some Web 2.0 technologies that key competitors lack, Card said, "I don't think they need to be that competitive in search to be a successful online media company."

This version of this story originally appeared in Computerworld's print edition.

Copyright © 2008 IDG Communications, Inc.

7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon