1. Which partner do you think has more to gain from the Microsoft-Yahoo! partnership, Microsoft or Yahoo!? Why?

Microsoft has already invested more than $5 billion trying to build an online business that can make money, and its online services business is still losing millions of dollars. But Bing has managed so far to gain a little more than 11 percent of the search market, and Microsoft is pinning its hopes for the infant search engine on a new ten-year partnership with Yahoo!, which holds about 17 percent of the market. Google claims an intimidating 65 percent and earns overall annual revenues of more than $23 billion.
“As soon as we close and implement the Yahoo! deal, we have achieved a milestone: for advertisers, we are a credible No. 2,”
says Microsoft’s senior vice president of online audience business. “Really, now, the goal is about share gain. If we grow share, we will grow our way into profitability, and we have confidence we can do that.” Once approved by U.S. regulators, the deal will give Microsoft effective control of a nearly 30 percent share of the search market by making it Yahoo!’s underlying search engine. “At 30 points we are now a credible option, so that number matters,” says Microsoft’s senior vice president. “The nice thing is we can say [to advertisers], you can be close to 30 percent share in one easy buy. That 30 percent carries a lot of weight in the marketplace. . . . There’s no question we intend to make a profit. . . . Clearly there’s a huge return in the search marketplace that can more than make up for the investments we’ve put in to this point. . . . Every day that we grow a tenth of point of share, that moves us further up the curve.”