Looks to increase web advertising presence and trump Google acquisition of Double Click.

Microsoft may buy Yahoo!

Microsoft has asked Yahoo! to enter into formal negotiations with a view to a take-over, according to the New York Post. The asking price is expected to be in the region of $50 billion.

Apparently this isn’t the first time the deal has been discussed, but the feeling is that that matter has taken on fresh urgency with Microsoft as it continues to be left behind on deals like the Double Click one.

"They’re getting tired of being left at the altar," said one banking source, who has recently had talks with Microsoft, to the Post. "They now seem more willing to extend themselves via a transaction to get into the game."

The move also coincides with the launch of Yahoo’s new, Google-style, search advertising platform, codenamed Project Panama. The initial performance of the platform seems to have fallen short of expectations, so maybe Microsoft thinks it can do better.

Microsoft’s own search engine – MSN – has significantly less market share than Google or Yahoo, so it would be a matter of combining the second and third biggest players to take on the biggest.

While it would certainly close the gap with Google in overall online advertising, it would still only bring Microsoft’s share of the search advertising market to 27 per cent compared to Google’s 65 per cent.

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