Now that Microsoft (MSFT) has lost its bid to buy Yahoo! (YHOO), all of the acquisition managing directors on Wall St. are hoping to get a chance to help Redmond use that $45 billion to pick-up some other internet companies. High on that list are Facebook, Digg, and Time Warner’s (TWX) AOL.
The head of Microsoft sent a signal that no one should hold his breath. According to the FT, Steve Ballmer, chief executive, scotched talk that Microsoft would turn to a “plan B” of other acquisitions to boost its online presence
Ballmer gets it. Owning inventory in the display ad world is not worth much. The price of most display advertising is falling. Large networks of websites auction off this space. The higher bidders know there is a lot of inventory, so they do not pay much. Efforts to make display ads more targeted have met with only modest success.
Search advertising is where the money is. Because it is so substantially targeted, marketers will pay a large premium
Ballmer is clearly prepared to take some big portion of his $45 billion and attempt to build a better search engine platform of his own. If he is successful he can deploy in through Windows and get it onto most of the world’s PCs. If the product is good, some people may use it. If not, they will turn back to Google (GOOG).
Ballmer may fail, but he is not going to start out by failing through M&A.
Douglas A. McIntyre
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