Yahoo! Rejects Microsoft Bid and Invites Google Bid

Posted on February 10, 2008 at 11:46 am (PST)

Microsoft made an offer to buy Yahoo!, but over the weekend Yahoo! rejected the offer saying they believe their stock is worth another $12 billion. However, last week as news hit the stock market Microsoft’s share value declined about the same price as they bid for Yahoo! Microsoft offered half cash, and half stock in their bid. Yahoo! is worried about retaining control over the new company, and Microsoft has said the MSN brand would be replaced by the Yahoo! brand, but Yahoo! still believes Google would be the better partner.

What’s really at stake? Years ago Yahoo! purchased Overture, which was a paid bid search engine out of Pasadena, California. Overture secured a patent for paid bid search advertising, and Yahoo! now owns that patent. If Microsoft were to purchase Yahoo!, then Microsoft would own that patent. Microsoft would then be in a better position to compete directly with, and to challenge Google’s control over the Internet advertising market. If Google were to purchase Yahoo!, then Google would become a monopoly in the Internet advertising industry, and government regulators may at that point step in to analyze exactly how Google’s ownership of Yahoo! might effect competition going forward.