MSN to Yahoo: An Overture in The Making?

There has been so much coverage since the NY Post dropped a bombshell that Microsoft was interested in a deal for Yahoo again, that I decided to wait a few days to soak up all the coverage before posting. (BTW - don't you just love it when the NY Post gets the scoop on more reputable papers like the New York Times and The Wall Street Journal).  Anyway, before I dive into why this would obviously help Microsoft if done correctly, I want to link to one more post on the subject from Henry Blodget of Internet Outsider because he has a great summation of how this deal could work or not work and this forms the basis for my discussion:

Would it be a smart strategic move for Microsoft and Yahoo to combine forces?  Absolutely.  Is the best way to do this to have Microsoft suck Yahoo into the massive Windows/Office borg?  Absolutely not. If Microsoft buys Yahoo, Microsoft should immediately spin the Yahoo-MSN business out as a separate company.  If it doesn't, both Yahoo and MSN will die.

Now, I've been buying online advertising on my own for a long time (yes, I've rarely used a media buying agency) and Yahoo has been and continues to be one of my favorite publishers especially when buying in the financial services category; Yahoo Finance is the crown jewel for any financial services campaign.  Yahoo has started to right the ship, if you believed it was foundering at one point, and has great properties and social marketing platforms like Yahoo Answers, Flickr, Yahoo 360; plus, it still has a top property in Yahoo News as well as great fantasy sports properties.  The other pluses in Yahoo's favorite is its industry class behavioral targeting, cloning modeling capabilities, Yahoo's homepage, as well as a top notch sales and account management team.  The only area where I see Yahoo slipping, even with Panama is on the paid search side.  More on that a little later.

Microsoft's MSN property on the other hand, is completely adrift with no way of fixing their problems anytime soon.  Yes, I've bought on MSN in the past and continue to dabble with their search platform, but I really find it difficult to come up with the rationale for placing any banner ads with them.  Here's why:

1. Prices for their ad units are typically more expensive than I can get for the same unit and while they believe they have a better product to justify the increased spend, I just don't see it.
2. Yes they have top traffic numbers, but I know of NO ONE that uses that site any more
3. Other than MSNBC, their content in my opinion, is on par if not slightly below what you can find elsewhere.  It is a great property, but the CPMs are way too high.
4. The only mass group that I believe has some value on MSN are professionals, but sadly MSN (or Microsoft) does not allow for behavioral targeting to them.  So while I would have loved to have put MSN on a recent media plan targeted at a particular professional audience their policies  didn't allow for it.
5. I can't find any innovative online marketing or social marketing platforms emanating from them and I've yet to see any links, commentary, blogs that come from MSN.
6. Finally, when I was looking to reach college students, their CPMs for Facebook were way too high which led me to look elsewhere.

Based on all of the above, I can see why Microsoft would covet Yahoo especially if they listened to Blodget and spun off the group.  However, why would Yahoo want to be a part of it?  Well, the only reason I can see is to combine their search business again back into one platform that say would be called Overture. 

From my recent experiences with both Yahoo and MSN's search platforms, I can tell you that I've had more success with MSN than Yahoo and that wasn't always the case.  Maybe I'm the only online advertiser that has seen this, but ever since Panama was launched, my Yahoo results have gone downhill.  Sure, Panama allows me to spend more, but for the majority of my clients  (hey political types that are reading this, remember I do a lot more advertising outside your space) I'm seeing better returns on MSN than Yahoo when it comes to return on advertising spends.  Yes, I do believe MSN's ads that tout their high ROI.  The only thing that MSN Search lacks is volume and once again by combining with Yahoo the two of them can get back to being Overture which used to outperform Google back in the early days.

Microsoft's overture to Yahoo should solve a lot of their problems if done correctly.  However, MSN could suffer a brain drain of Yahoo's talent and Yahoo's audience if they try and force fit the merger under the Microsoft branding and draconian behavioral targeting policies.  If nothing else, they should combine their search business once again, bringing the high ROI capabilities of MSN's search with Yahoo's  traffic  so they can compete with Google once again as Overture.

PardonMyFrench,

Eric