Murdoch Vs. Microsoft: What's Rupert Got to Offer?

News Corp. Deal Could Stave Off Yahoo Takeover Bids While Giving Marketers Some Nice Synergies

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NEW YORK ( -- There's one man standing in Steve Ballmer's path to acquiring the most visited site on the internet: Rupert Murdoch. And it's hard to bet against someone who almost always gets what he wants.
Microsoft CEO Steve Ballmer
Microsoft CEO Steve Ballmer Credit: Don Ming Jang
Mr. Murdoch is working on a deal that would make News Corp.'s Fox Interactive Media assets part of Yahoo in exchange for a 20% stake in the newly combined entity, according to persons familiar with discussions. And though industry watchers are bearish on his ability to out-maneuver Microsoft, it's tough to deny that the two companies offer some nice synergies for marketers.

"If it happens, it takes Yahoo out of a lose-lose proposition into one that almost immediately becomes win-win," said Tim Hanlon, exec VP at Publicis Groupe's Denuo, in an e-mail. "For Yahoo, [it] would add a key component that Microsoft can't -- content. For News Corp., [it would add] immediate access to a wealth of web services that neither MySpace alone nor 10 digital acquisitions could ever get them."

Yahoo desperately wants to stay independent and doing a deal with News Corp. could stave off the takeover proposed by Microsoft. In the worst-case scenario, the talks put pressure on Microsoft to raise its bid.

What would a Fox/Yahoo entity look like? First of all, it would be a display ad giant. According to ComScore, Yahoo has 18.8% of total display-ad impressions online, while News Corp.'s FIM, which includes MySpace, has 16.3%. Microsoft, meanwhile, serves up 6.7%.

Combined forces
Sure, MySpace's display inventory doesn't monetize well, but it is improving as FIM rolls out its hyper targeting. And one person familiar with the Yahoo-News Corp. discussions suggests the combination of MySpace's targeting and Yahoo's behavioral data could be a huge boon. Additionally, improving the yield on low-cost inventory is a priority for Yahoo; President Sue Decker said tools like media exchanges have already reduced the gap between premium and non-premium inventory from 10 times to three times.

Google already owns the video space, thanks to YouTube, but a Yahoo-FIM merger would make an arguably more powerful combination than Yahoo-Microsoft, as it would unite the No. 2 and No. 3 players (FIM notched 358 million video views in December, Yahoo had 340 million. Microsoft sites had 180 million.)

Of course, Yahoo-FIM would lack the search scale of a Yahoo-Microsoft combo, but not by as much as one might think. December ComScore data show Microsoft sites accounted for 984 million U.S. searches while MySpace accounted for 342 million U.S. searches. FIM already has an ad deal with Google to provide search and other ads on MySpace; it's unclear whether a change of ownership would allow Google or FIM to end that partnership.

"The Yahoo-Fox combination doesn't require as much substantial financial engineering or require Fox to overcome significant Yahoo resistance," said David Graves, principal analyst at Forrester Research and former Yahoo-er, who added the cultures seem more simpatico than those of Yahoo and Microsoft. Whereas Microsoft and Yahoo both have their own robust ad platforms -- and would likely fight over whose gets used if the two were combined -- FIM would be easier to plug into Yahoo's ad platform.

Testing the waters
Still, while it sounds good on paper, shareholders have to be convinced -- and few think a Yahoo-FIM hookup will be enough to do that. Right now management is dry testing the concept with a few key shareholders to see how they would react to a potential merger -- and whether they would value the combination at $50 billion dollars, which is the value News Corp. and Yahoo see the deal being worth.
Yahoo CEO Jerry Yang
Yahoo CEO Jerry Yang Credit: Zang Liwen
In a note to investors, Deutsche Bank analyst Doug Mitchelson calls such a deal "a long shot" and said it's unlikely to win over Yahoo shareholders. He added, "Microsoft has a clear desire to acquire Yahoo and has significantly more resources than News Corp."

Plus, said Jeff Herzog, CEO of iCrossing, the advantage of technology in interactive marketing favors Microsoft. "Marketing and technology together are terrific because they're incredibly targeted and quantifiable and Microsoft and aQuantive bode well for that," he said.

What Murdoch would gain from Yahoo Finance deal

Rupert Murdoch -- the most powerful man in business, and business news?

Just a few months after he closed the deal on his quest for the much-coveted Dow Jones Co., the famously ambitious Australian is looking to link up with the most-trafficked online-news site, Yahoo Finance, through a deal that would give his News Corp. a 20% stake in Yahoo.
Rupert Murdoch, chairman and chief executive officer, News Corp.
Rupert Murdoch, chairman and chief executive officer, News Corp. Credit: Don Herrick

His influence over business news would easily span a trifecta of powerful media. What's more, his audience would cover everyone from high-end business professionals who start every day with the Journal to more casual business audiences who surf over to Yahoo Finance after checking their e-mail.

Yahoo Finance reaches almost 19 million monthly unique visitors -- and its growth totaled 81% over the past year, according to ComScore. It accounts for almost a quarter of all news and finance-related online-display advertising -- more than, CNN Money, and Reuters combined.

Add that to his current assets: The Wall Street Journal is the country's largest business daily and is easily its most influential, with a global print circulation of almost 1.9 million. Dow Jones' online assets, including Marketwatch and, rank fourth for U.S. traffic with 7 million visitors, behind portal finance sites only.

Successful track record
And if Mr. Murdoch is successful in building Fox Business News into a major cable TV player -- and his track record with Fox News suggests he can make it happen -- he will also have a major TV asset. (Even the New York Post, whose tabloid business coverage may sometimes veer toward the sensational, is increasingly fuel for blogs and has proved itself to be the perfect place to float rumors and rumblings.)

At stake, however, may be more than just a Murdoch-helmed business-news juggernaut. Getting into bed with Yahoo may prove just as savvy a defensive move as an offensive one.

David Graves, principal analyst at Forrester and a former Yahoo-er who helped build the portal's finance site, suggests that the idea of putting Marketwatch, Yahoo Finance and Wall Street Journal together in some sort of triumvirate would be incredibly powerful in the financial-advertising world.But, he points out, if Microsoft's bid for Yahoo is successful, Microsoft and NBC have a major partnership through, which could eventually lead to a Yahoo Finance-CNBC linkup.

"Whoever wins is going to be able to put together something in the financial community that would be pretty powerful," he said.
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