Microsoft Abandons Yahoo Acquisition

Weaker Chance With Time

As time passed, Microsoft's hopes of a swift acquisition and integration evaporated. Ballmer maintained all along that the offer was fair and seemed perplexed that Yahoo didn't jump to accept it. At the prospect of a dragged out proxy fight, to be followed by a complicated and lengthy integration of MSN and Yahoo, Ballmer apparently grew increasingly disenchanted.

If Microsoft had $40-plus billion to spend on Yahoo, it can certainly go shopping for the many startup and niche companies that have gained traction in the Web 2.0 space in areas like social networking, social news, video, Web-hosted applications and mobile advertising.

Considering Ballmer's well-known competitive nature, he will dust himself off and draw up another plan, because one thing is clear: while he is giving up on acquiring Yahoo, he is certainly not giving up on his dream to top Google in online advertising, particularly in search.

"We have a talented team in place and a compelling plan to grow our business through innovative new services and strategic transactions with other business partners. While Yahoo would have accelerated our strategy, I am confident that we can continue to move forward toward our goals," Ballmer said in Saturday's statement.

"We are investing heavily in new tools and Web experiences, we have dramatically improved our search performance and advertiser satisfaction, and we will continue to build our scale through organic growth and partnerships," said Kevin Johnson, Microsoft president for platforms and services, in the statement.

As of the end of 2007's third quarter, Google had almost 25 percent of the U.S. Internet advertising market, up from almost 21 percent in 2006's third quarter, according to IDC. Meanwhile, Yahoo's share during this period dropped to 11.3 percent from 12.3 percent, while Microsoft's declined to 5.2 percent from 5.8 percent, according to IDC.

In search usage, Google held a commanding 62.4 percent of queries worldwide, followed by Yahoo in a very distant second place with 12.8 percent, according to comScore. Microsoft ranked fourth with 2.9 percent, after Baidu with 5.2 percent.

In November, Yahoo ranked first in the U.S. in display ad impressions with a 19 percent share, while Microsoft came in third with 6.7 percent, after News Corp.'s Fox Interactive (16.3 percent), according to comScore. Google took seventh place with 1 percent.

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