Microsoft and Yahoo have been involved in an ongoing soap opera over the
outright purchase of Yahoo as a whole or Yahoo's search business by Microsoft.
The talks between the two companies have ended and begun several times and
purchase has been agreed to by the two parties.
Microsoft CEO Steve Ballmer told analysts at its annual meeting that his
an agreement with Facebook to integrate Microsoft search services into the social
networking site. In 2007, Facebook and Microsoft made public that Microsoft
had bought 1.6% of Facebook for $240 million.
The original purchase gave Microsoft exclusive rights to sell advertising on
Facebook until 2011. The new agreement between Facebook and Microsoft is an
extension of the original agreement between the two companies reports The
Wall Street Journal. Microsoft rival Google has a very similar deal in
place with MySpace, the largest of the social networking websites online.
Google search technology is used on the MySpace website and Google sells the ad
space for MySpace.
The Wall Street Journal reports that a significant amount of time
during the analysts meeting was spent addressing concerns about Microsoft's internet
business. Ballmer says that Microsoft will be boosting its spending for on-line
technologies and marketing. Part of the increased spending will be used to
acquire new companies.
Ballmer and Microsoft are still trying to spin the failed purchase of Yahoo
to a positive. At the time, Microsoft and Yahoo were in negotiations, Microsoft
saw Yahoo as the fastest and most efficient way of gaining ground in internet
search. Ballmer said that Microsoft could get to where it needed to be without
Yahoo, but it would take much longer to get there. Now Ballmer says that the
integration of Microsoft and Yahoo's operations would have created "huge
Why is internet search such a big deal for Microsoft? The Wall Street Journal quotes Ballmer as saying, "Search is
one of the starting points on the Internet. It's the best place to distribute
new Internet services to the consumer."
The new agreement between Microsoft and Facebook allows Microsoft to be the
exclusive provider for search and ads only for U.S. Facebook users.
Microsoft announced last week that Kevin Johnson, the executive in charge of
the division that includes its online services was stepping down and that the
division will be reorganized. Microsoft also announced that it would be
purchasing a company called DATAllegro for an undisclosed sum. DATAllegro is a
start-up that manages data warehouses with computing hardware and is apparently
the first purchase by Microsoft since it said it would increase spending for its
quote: Did Microsoft know that this would cause some sort of shareholder backlash and thus throw the company into disarray?