Yahoo Squeeze Microsoft with Overture Acquisition

Yahoo!’s $1.6 billion acquisition of Overture potentially is a huge blow to Microsoft. Yahoo! announced the transaction this morning. In the Jupiter Research report “MSN Search: Microsoft Guns for Google, the Desktop and the Enterprise,” which published today, Matthew Berk and I predicted that Yahoo! would likely buy Overture.
Do compaies cry out in pain when they get squeezed? Fortunate not, or we’d have to little to a whole lotta ouching. The just-announced planned acquisition of Overture by Yahoo puts the Big Gorilla in a difficult position, well expressed by Joe Wilco in the Jupiter analyst’s Microsoft web log:
“The acquisition puts Microsoft in the difficult position of relying on rival Yahoo! for key services, alogrithmic search technologies and paid search. Earlier this year, Yahoo! acquired Inktomi, which provides alogrithmic services to MSN. The Overture deal is potentially more problematic for Microsoft. That’s because the majority of MSN revenue comes from paid search services–or at least it has in recent Microsoft quarterly results. Microsoft announces fourth fiscal quarterly results on Thursday, and it will be interesting to see the extent of paid search’s contribution to MSN revenue.” (Link via Michael Gartenberg)
For more, see the comments at Up2Speed:
Yahoo already owns Inktomi and had not yet integrated Inktomi results within Yahoo results. Post-merger, they will also own FAST and AV algorithmic technologies
The Silicon Valley take in the Merc:
“The combined assets position Yahoo as the largest global player in the rapidly growing Internet advertising sector,” said Terry Semel, Yahoo’s chairman and chief executive officer, said in a statement.