After three months, it's over. Microhoo, the humorous name given to the much talked about vision of a joined Microsoft and Yahoo, won't come to fruition after the two firms failed to see eye-to-eye on price.
"Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo has not moved toward accepting our offer," Microsoft CEO Steve Ballmer said in a Microsoft press release. "After careful consideration, we believe the economics demanded by Yahoo do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal."
The news likely brings to an end what had become a lengthy, and at times, heated process between the two companies. As late as last Friday, Microsoft had been rumored to be considering a full-blown proxy fight for the company. Meanwhile, Yahoo spent much of the last three months cozying up to rival Google to explore a deal that would allow the search giant to monetize Yahoo's traffic.
It's unclear where Microsoft, which has been on something of a spending spree, will go from here. Speaking to CNBC, investment guru Warren Buffet observed that Microsoft had shown great discipline in its courtship of Yahoo.
"When you hit your choking point, you quit," Buffet said.
But according to Brad Berens, chief content officer and editor at large for iMedia and ad:tech, it's easy to see why Microsoft was able to walk away from such a large deal.
"It's worth interrogating just what the takeover would have bought (and still might buy) Microsoft in the first place, which is not much -- a temporarily increased reach for its display advertising network and a solid jump from No. 3 status in search to a No. 2 that would still be distantly behind Google," Berens said.
Going forward
With the dust settling on the ashes of Microhoo, Doug Weaver, president of Upstream Group, says the apparent collapse of the deal may be overstated in terms of its effect on the rest of the online advertising industry.
"Even if the deal had gone through, the two companies [Microsoft and Yahoo] would likely have occupied parallel tracks for a long time to come," Weaver said. "Long term, the really interesting question is how Microsoft [with aQuantive] and Yahoo [with Right Media and Blue Lithium] go forward vis-à-vis Google/DoubleClick?"
According to Weaver, whose resume includes past consulting for Yahoo and close work with Microsoft for industry events, the future of online advertising will be a fight between a handful of big companies.
"I'm convinced that those three companies – and perhaps a fourth – represent the future of transactional plumbing for the internet and ultimately for all electronic media," Weaver explained, adding that the real question is whether Microsoft and Yahoo can innovate against Google more effectively as a team or as competitors.
For now, it will be as competitors.
That could mean a tough road for Microsoft, which has had trouble connecting with the web's Silicon Valley-based advertising culture.
"Once again, Microsoft has proven that it simply does not understand the culture of Silicon Valley," added Drew Ianni, chair of programming and content for ad:tech. "Microsoft has a long track record of abusing its power in their attempts to destroy Silicon Valley companies -- from Apple in the '80s to Netscape in the '90s to Yahoo and Google today. These and other companies are part of the fabric of the Valley and have given it its lifeblood and represent the traditions and rich heritage of what the Valley is about."