Reports in the Wall Street Journal and New York Post are suggesting that Microsoft and Yahoo are talking about a possible merger, in an effort to compete more effectively with Google.
If the reports are to be believed, Microsoft seems to be the driving force behind the move, spurred on by losing out to Google in the bidding for online ad firm DoubleClick.
The New York Post says that Microsoft approached Yahoo a few months ago with a takeover offer, which the company rejected. Wall Street analysts have put a $50bn price tag on Yahoo.
If the two companies merged, they would hold a combined search marketing share of around 27%, which is still a long way of Google’s 65%.
Demographically, the pair would be suited to each other, with MSN drawing an older audience with its news focus, while Yahoo attracts a younger demographic with its entertainment coverage.
Microsoft is said to be concerned about Google’s dominance of the online ad market, as well as Google’s development of web-based software, which puts it in direct competition with Microsoft Office.
On the other hand, both companies have spent money developing their own search marketing platforms recently. Yahoo with its new Panama system, and Microsoft with adCenter.
Whether there is much truth in the rumours or not, the news has had an effect on Wall Street, with Yahoo shares increasing over 18% in value in pre-market trading.