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Microsoft-Yahoo deal may hurt Google ad sales

What keeps Google awake at night

A potential Microsoft-Yahoo merger probably doesn't have rivals at Google panicking just yet, but if a deal comes off Google may have to worry about its hold on the consumer search and online-advertising markets.

Google's performed well in creating and acquiring technology with audience and advertiser reach, says Yankee Group analyst Jennifer Simpson, while noting Google's purchase of YouTube and internet advertising company DoubleClick.

But if Microsoft and Yahoo officially announce a merger, Google co-founders Sergey Brin and Larry Page "might be kept up a little bit at night thinking about how they might improve the platform," Simpson says.

But Simpson conceded: "Google's still in a very good position."

We reported on Friday that Microsoft has started a new round of talks with Yahoo - although previously Yahoo turned down an offer from Microsoft. The companies appear to be in "early-stage discussions" over a merger or some other type of deal that would combine their respective strengths.

Microsoft officials are feeling somewhat threatened by Google's new suite of collaboration and communication tools for businesses, and are deeply bitter about losing out to Google in their bid for DoubleClick, says Rebecca Lieb, editor-in-chief of the ClickZ Network and Search Engine Watch, a publication covering all things related to search.

Microsoft is not the type of company that makes acquisitions right and left, and buying Yahoo would ease some of the pain of failing to take over DoubleClick, she says.

"It was a tremendous blow to Microsoft that they did not emerge the victors in the acquisition of DoubleClick," Lieb says. "I've spoken to people close to that deal and I know it is an enormous pain point at the most senior management levels."

Microsoft wanted DoubleClick so it could better compete with Google in the rapidly growing online-advertising market.

"Online advertising is the fastest-growing medium in history. It's gone to a multibillion dollar business in about a decade. Television advertising didn't grow that quickly," Lieb says.


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