Microsoft's failure to secure Yahoo agreement 'costing it £750m a year'

Published on Saturday 6 June 2009 14:23

MICROSOFT has been warned it is haemorrhaging almost £750 million ($1.2bn) a year by failing to secure a tie-up with Yahoo.

The investment bank Credit Suisse used an internet blog website to urge the US software giant to strike a deal and finally bring an end to on-off talks that have lasted well over a year.

It claims Microsoft cannot survive in the global search arena on a standalone basis, despite launching a 61m advertising campaign for "Bing", its new search engine proposition.

Credit Suisse's technology group vice-president Philip Winslow told Barrons online bloggers' site that failure to do a deal with Yahoo remains Microsoft's "core competitive issue".

Until it does so, it cannot seriously "gain scale and scope necessary to compete more credibly and profitably" and take on market leader Google's dominant share in the highly lucrative internet search advertising business.

Winslow expects Microsoft's internet search business "to drive large operating losses for the foreseeable future" in its online services business division, as it suffers a relatively low and declining market share in search advertising.

Yahoo's new chief executive Carol Bartz has met her Microsoft counterpart Steve Ballmer more than once recently. But from initial enthusiasm about striking a deal, Bartz is now playing harder to get.

According to one observer, the blogosphere is being used not only as a social networking tool but increasingly as a market mover – "in this case to influence a deal worth potentially billions of dollars".

WEST of Scotland e-commerce and digital marketing company 360innovate has been told by the Advertising Standards Agency (ASA) it can keep a "Google is God" roundabout billboard next to its Hillington business park office.

The firm's spokeswoman, Laura Davis, reported on the firm's blog that the ASA had received several complaints about the hoarding. She said: "Some would consider it the God of search engines and the phrase is thrown around all over the internet.

"We explained that we meant, by no means, to be blasphemous."

After a week, the ASA replied that "while distasteful to some, the advert was unlikely to cause serious or widespread offence".