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Microsoft Leaks Memo, Plots With Yahoo

David A. Utter
Staff Writer
Published: 2006-05-03

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Shadowy skullduggery, twilight tete-a-tetes, and disseminated disinformation may have all been part of rumored talks between Yahoo and Microsoft about their online rival, Google.

What do Microsoft and Yahoo have planned? Will they spoil Google's Media Day next week with a groundbreaking deal announcement? Tell us what you think at WebProWorld.

While it doesn't quite match Smiley and Karla meeting on the bridge in Smiley's People for intensity, the idea that Microsoft and Yahoo have conducted clandestine coffee-klatchs and mused over the downfall of Google just sounds so, well, 1970s.

Instead of the delicate and exacting tradecraft of spymasters being employed by the second and third place companies in terms of search engine market share, the Wall Street Journal reported that the duo, Microsoft and Yahoo, have been quietly conversing, while sources "familiar with the situation" informing on their corporate masters.

Perhaps we can cast Redmond in the role of Soviet-era Russia, and Yahoo as the Iron Curtain-wearing East Germany. Both seek to undermine the American influence of Google during the Cold War. The bullets in this battle won't be fired from automatic weapons, though.

No, contextual ads have proven more damaging in the Cold War of paid search than any fusillade of automatic weapons fire. Google, the West, has grown and prospered, while the East has stagnated behind the West, envied its wealth, drifted behind in the search technology arena.

Separate, they haven't been able to make inroads. Not that they have not been trying. Yahoo has its improved search advertising relevance algorithms in testing with "Project Panama." Sometime soon, Yahoo may bring Panama in from the cold of Scandinavia, and test it in the United Kingdom this summer.

Microsoft has been belligerent and vocal in developing its search ad rival called adCenter. On occasion, it has been aggressive in touting its paid search technology. Those with long enough memories may recall video of Khruschev at the United Nations in 1960, pounding a shoe on a table in defiance of the assembly and sending Americans to bed wondering if the next sunrise would be the start of a nuclear winter.

The younger audience only needs to recall the tale of Microsoft CEO Steve Ballmer, allegedly throwing a chair upon learning of a subordinate's defection, to imagine similar anger. If that ever happened, of course.

Today, Yahoo delivers contextual advertising to its potentially closer ally, Microsoft. But that relationship ends when June does, and adCenter steps in to replace Overture throughout Microsoft's online properties.

That closeness received some emphasis as a purportedly leaked internal email from Ballmer to the Redmondians found its way to the Seattle Times. A fist-pumping Ballmer, likely echoing a pose from his collegiate athletic days, appears with the article.

Ballmer told Microsoft's employees that the company would make "heavy investments" in Internet search. "[O]ur goal is to create the Web's largest advertising network, giving us an engine that will enable us to monetize our services and compete against Google," Ballmer wrote.

They won one skirmish recently, possibly the equivalent of Alex Leamas being cornered and gunned down in an alley at the end of "The Spy Who Came In From The Cold." Amazon ditched Google web search in favor of Microsoft for the Alexa and A9 websites.

That probably wasn't a significant wound to Google, but it drew blood nonetheless. Microsoft and Yahoo want to bleed Google more. Reportedly, they have been discussing how to do so.

Microsoft took one step that reinforces the Ballmer Memo, by luring Steve Berkowitz from Ask.com to take control of MSN.

There's money to spend in Redmond's war coffers, in the billions. They could spend it on Yahoo. It doesn't make sense to do that though. Unless Microsoft wanted to buy Overture and/or Project Panama to complement MSN adCenter, and combine their ad networks.

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About the Author:
David Utter is a staff writer for WebProNews covering technology and business.

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