Google Considering Bid for Yahoo?

Google is working with potential partners to put together a bid for Yahoo. While Google could have plenty of motives for that bid, it may simply be joining the fray to ensure that competitors pay the maximum price for this major acquisition.

Google’s Bid and the State of the Yahoo Bidding War

Google is working with “at least two private-equity firms” to secure financing for a Yahoo bid, according to an insider source cited by the Wall Street Journal. This source indicated that Google has yet to put together a formal proposal.

If Google doesn’t purchase Yahoo, it’s entirely likely that a competing company will. Microsoft and Alibaba are already on the list of would-be bidders, with both companies pursuing said bid in part to secure their own interests within Yahoo.

Google also has a stake in Yahoo’s future. Yahoo Japan, a significant contributor to Yahoo’s annual revenue and one of the only regional search engines where Yahoo remains the most popular option, is currently powered by Google.

Microsoft has announced more specific plans to work toward the purchase of preferred stock; this means they may never submit a bid for the full purchase of the company. As a result of the search alliance forged by Bing and Yahoo, Microsoft receives a share of revenue and is responsible for running Yahoo’s search ads and algorithm on all Yahoo properties except Yahoo Japan – Bing is already powering all organic Yahoo results except in Korea. Given these vested interests, some control over Yahoo’s future is a crucial part of retaining market footing.

Google’s Motives for the Bid

Google may have one of several major motives for a bid on Yahoo. Obviously, ousting Bing results in favor of Google results on Yahoo sites would be major; in the U.S., control of Yahoo would give Google over 80 percent of search share. Taking control of Yahoo would also give Google greater control in the Asia-Pacific region, one of the few areas where Google isn’t the leader in search.

Additionally, Yahoo’s booming display ad presence would help Google’s own display ad services. Yahoo properties could also see enhanced monetization thanks to Google technologies (e.g., DoubleClick, existing display ad features, upcoming video display ads, etc.).

Further, Yahoo properties – which remain popular, at over 700 million monthly unique visitors – would provide a strong opportunity for cross-marketing Google sites and services. This could be an especially important move for spreading the young Google+ social network to different demographics.

All that said, there’s one motive that’s likely Google’s primary incentive: to increase the final bid for the competitor who ends up purchasing Yahoo. In other words, getting financing for the bid may just be part of some grand posturing.

The reason why bolstering the competition on the bid is the most probable motive is that Google would have an excruciatingly hard time buying Yahoo. Given the antitrust procedure that would inevitably result from a buyout, and the number of Yahoo services that are either flagging or redundant to Google’s own, an actual purchase is likely not in the Google’s best interest.

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