Silicon Valley Rumor: Microsoft to Buy Yahoo Search and Then Facebook

My sources say that the Yahoo and Microsoft teams are bunkered down in a Palo Alto hotel hammering out the final stages of a transaction that will have Microsoft picking up the Yahoo search business. Word is that this deal will be done this week. While this is not surprising, it does bring to question the motives and plans of Microsoft.

Techmeme is buzzing about the latest Microsoft Yahoo talks that has Microsoft buying the Yahoo Search business only. Here is Microsoft’s and Yahoo official statements.

Why would such a complicated transaction (just Yahoo search with all the headaches and all) be in the cards for Microsoft? After the failed bid for $40 plus billion for all of Yahoo, Microsoft’s intentions are clear. Buy the search business from Yahoo and take that team and go spend at least 20 billion for Facebook. Integrating the search team at Yahoo with Facebook puts a formidable army to take on Google.

What a move this makes. Yahoo gets everyone off their back, Microsoft gets a credible position in search, and buys Facebook to compete with Google. The price about $45 billion.

This is going to be good.

Update: here is a post from Kara Swisher – Microsoft’s Kevin Johnson’s “We Can Compete” memo – Microsoft needs Facebook and Facebook needs Microsoft.

Update 2: Robert Scoble (my former employee 🙂 ) is taking my report of Microsoft buying Facebook conversation to the next level. This will be developing further but in the meantime the jockeying is going on. This explains the recent moves at many levels… take the employees of Google leaving to join Facebook.. Facebooks posture toward Google, and the general platform behavior lately of Facebook. Maybe they knew that they were pulling a Netscape last week – knowing that Microsoft guns for hostages were coming into town.

Update 3: This is why I love this guy Umair.. Leading minds see the strategy…good post Umair.


Author: John

Entrepreneur living in Palo Alto California and the Founder of SiliconANGLE Media

106 thoughts on “Silicon Valley Rumor: Microsoft to Buy Yahoo Search and Then Facebook”

  1. That would be quite a huge move. Of course, I don’t think Microsoft would know how to run something like Facebook, and they clearly don’t know how to do search… so users beware for sure.

  2. msft buying search by itself isn’t the big move..the idea of pulling just search is one step. word from my sources say that grabing that yhoo team and combining it with facebook is brilliant for msft… the price is the same as the amount of the entire Yahoo.

  3. Yahoo get a few billion for search with a nice business deal to keep the billlions coming in for revenue and shareholder value. Yahoo gets the Icahn and shareholders suit off their back. Microsoft gets what they want search position but a team to run Facebook platform.

    Facebook has been struggling lately with their platform most recently the PR blunder this past week with Friend Connect. Facebook is only worth $15billion – Msft puts up $20 and it’s done.

    We’ll see

  4. It’s getting more and more interesting.

    I doubt they will buy both Facebook and Yahoo in near future. Memo did refer to small and targeted acquisitions. Facebook won’t be small by any stretch.

    Also what will qualify as “disruptive” in search business?

  5. M$ needs to re-invent itself badly, so the Facebook and/or the Yahoo! Search purchases will be very important in defining M$ future. The Facebook deal would give M$ a strong leap forward in the Social Media space, where they have zero market presence, impact or control.

    However, these possible deals would spell trouble for everybody that cares at all about privacy on the web. I suppose Social Media sites by nature are more “open” and “social”, but the mere thought of M$ buying Facebook makes me very nervous as an end-user. Same goes for M$ buying Yahoo Search. I’ve lost trust in M$, so these possible acquisitions are making the hair on my neck stand up and freak out!

    The revenue potential for M$ is incredible provacative, so they must be compelled to make a sizeable purchase of either or both Facebook or Yahoo! Search. Personally, if I was M$, I’d buy BOTH asap. my 2 cents!

  6. I dont get it, maybe Im not the smartest guy, but some questions arise:

    1) how will Microsoft retain the brand image of Yahoo search – I mean it is almost a sure thing that no matter what they buy will devolve into another :live-blah misbranded product? no?

    2) what will Yahoo do with the missing search revenue? Just replace it with Google. I thought that Yahoo has sunk almost a billion into its search platform R&D, – isnt this an admission that they have failed? If so, why would MS want it?

  7. Microsoft will no doubt make a significant purchase soon. It really does remain to be seen how they integrate it (Who heads the team), and if they overpay for it. They have the talent to innovate something exciting. They need a fast way to enter the search advertising business. I’m not sure that Facebook is the answer at all.

  8. I’d guess that if MS takes control of Yahoo! Search, they’ll just leave the brand alone, no rebranding at all for the short term. Worked well for IBM and Lenovo and would provide the least distraction for Yahoo Search users. Yahoo! gets a share of the revenue for a several years and MS gets what they are truly after.

  9. Will Yahoo please sell. Yahoo has not been producing since google took over the search business. Let microsoft and google fight with all their mighty powers.

  10. This is about buying the next “start page”. Facebook, if it succeeds, does so by become the default home page. Search is core to a home page (not searching facebook, duh). Microsoft is the only company in the world who can set the default home page to a large portion of the internet. This is a great strategy for Microsoft to own at least 50% of the search business in two years.

  11. Jimmy Dell has a great point. It’s a new strategy game…Microsoft needs a flank to move on Google. One small element like Yhoo search and FB can create value from the existing msft services. Right now Microsoft has to be rethinking a rebuild of it’s services approach.. Microsoft has great technology and some sucky technology… they are going through their portfolio and reengineering their online architecture

    small price to pay for Facebook when you crunch the msft numbers

  12. John this just doesn’t feel right, even if you discount the denials from Facebook. Two challenged search efforts won’t make a great search effort. The value of Yahoo to MS is the huge internet empire, not the “second place” search department.

  13. If Microsoft purchase Facebook, or if there are even rumours abound of this type of purchase, I am most definately cancelling and having my account deleted permanently. Microsoft can’t do anything anymore; or at least anything that doesn’t involve company buyouts.

  14. Furrier, what part of “Pursue small, targeted acquisitions” in Kevin Johnson’s “leaked” email are you unable to grok? I don;t MS would categorized FB as a small, targeted acquisition. Unless they end up paying what FB is actually worth, and not it’s speculative worth

  15. Dave: i am able to grok all of his memo. That is why i wrote the post. Are you confused? It’s not about what he said it’s about what it means. Thats where I come in.

    Msft is targeting FB clearly and confirmed from sources.

  16. My comment to #57 Dan’s trackback – very relevent post by Dan..

    here it is my comment that I left on his blog
    hey Dan,
    what you’re highlighting is very historic.. these phenoms that your referring to is the massive change in the real time communications infrastructure.. conversations with not so perfect info injected into a marketplace of connected sources are the new efficiency.

    The big issue that you’re missing is context..for example I refer Kelly Feller who I know and have worked with at Intel to Umair (who i’ve been following since he started blogging) because Kelly and Umair would benefit by knowing each other – Intel is doing some great work in social media. I did both of them the favor asking nothing in return (that’s the new net). I wasn’t as you were suggesting pumping up my post.

    The bigger picture is about social science that intersects technology, relationships, and information. Umair is on the cutting edge of this and is tracking it – does he have all the answers not really no one does but he is developing great work in an open collaborative way.

    Personally link baiting will be history as the net gets smarter with filters … information striving for perfection wins!

    Hey that’s an opportunity for you to invest 🙂

    You’re right Twispers phenomenon is real like the unification of the internet.

  17. @62. Fair enough. However, knowing Microsoft’s history, they’ve RARELY to two major aquisitions in succession. Quick, excluding adSense, when was the last time MS paid over $2B for a company? BTW, the answer is never. So, history leads me to believe that excluding the Yahoo:search component, which Johnson acknowledged, they have little interest in aquiring Facebook. At least at any price above $1B, and even then they would be crazy and wouldn’t fit their MO. If you look at their history, the majority of their acquisitions have been “small, targeted, acquisitions”. I would hardly put Facebook in either of those categories. Again, unless, like I said, they pay the REAL price for Facebook, and no the “futures” inflated price. History shows that in the M&A space, Johnson is saying what he means. So, again, I gotta wonder what dots you are connecting from Johnson’s email

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