Yahoo's Blake Jorgensen May Be Gone, But He's Right

So, I was just about to publish this post when I learned that Blake Jorgensen (at right), the Yahoo CFO who this entire post hinged on, has left the company, only one day after telling the crowd at the Goldman Sachs Technology and Internet Conference that the company wouldn't be opposed to doing a deal with Microsoft on search. And here I was, ready to call a a Microsoft-Yahoo search relationship inevitable because now both sides of last year's takeover-that-wasn't had said something in the last few days about a partnership being a good idea..

OK, let's press the reset button on this post: Microsoft and Yahoo should still combine their search operations.

Jorgensen said yesterday that such a deal would make sense, with the proviso that no matter how such a deal is structured, Yahoo would need to hold onto the intel that comes from tracking all those keyword searches and click-throughs.That makes sense. The data that search coughs up is way too valuable, and it would also be a mistake to decouple search from the display advertising space at which Yahoo excels because the two are intrinsically connected. But, if Microsoft and Yahoo suddenly come at the market with a combined 30 percent market share, heads will turn, just a little, in the duo's direction.

As is so often the case, the numbers tells the story. Based on the data from a post I did a few weeks ago, Microsoft and Yahoo teaming up on search is the only way for the two to pose any challenge at all to Google, and they should get it together fast. Let's review:in the year since Microsoft first launched its bid to buy Yahoo outright, the market share of the two has fallen as Google pulls away. (That's in terms of searches, not ad dollars, but one flows from the other). For instance, even as Microsoft increased the number of searches from 895 million to 1.05 million, its share shrank in January compared to the year earlier by almost a full percentage point. It now stands at just above 11 percent. Yahoo's share slipped even more -- from 19 percent to 16.2 percent.

There are a few other potential partners out there for both companies, but to call those companies true partners would be laughable. The most market share either could pick up from, say, doing a partnership with AOL is four percent. Time to get a deal done.

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