Well as I sat there sipping a cold coke in Cyprus on a sun bed over looking the Mediterranean I contemplated all the big news that was occurring in the field of search engine marketing in my absence. With Microsoft’s deadline of the April 26 2008 for the purchase of Yahoo already passed I wondered whether the deal had gone ahead or whether Microsoft had acted on their hostile takeover threat. Either way I was assured something big would have happened in the search engine marketing arena.

So I was a little disappointed when I powered on my laptop to find out the deadline had passed without any action at all on Microsoft’s part. So what is going on, were Microsoft’s treats empty ones to the search engine firm.

This must look bad on Microsoft’s Chief Executive Officer Steve Ballmer because he has been pursuing the search engine firm for the last three months and with Yahoo forming closer ties with its rival search engine firm Google, than surely he has potentially lost his grip on the proposed purchase? However this does not appear to be the case as yesterday he was quoted as saying he would walk away from the purchase of the search engine before he overpays for Yahoo. Steve Ballmer told Microsoft staff that he would not pay “a dime” more than he thinks Yahoo is worth.

The Wall Street Journal reported that a hostile bid was still on the cards and that Microsoft will now target Yahoo’s shareholders directly. But if this is the case than I believe that Microsoft would have to seriously consider raising their original bid for the shares. Microsoft originally valued Yahoo at $31 a share, or around $44bn (£22.13bn), but after yesterday’s closing price it has made the offer lower at $29.48 a share ($42.8bn). Yahoo shares closed yesterday at $26.81. There appears to be some reflecting of uncertainty on Wall Street as to whether the Microsoft/Yahoo deal will proceed. But to me I feel that the search engine firm is just holding out for a higher offer, maybe around $35 a share, valuing the search engine company at almost $50bn. Who knows maybe the search engine firm will even go so far as to demand $40 a share.

If the merger was to occur it would give Microsoft a more competitive position against Google’s growing dominance in the area of online search. But if the merger is a hostile one than Microsoft may find it hard to hold onto Yahoo employees and that pool of talent could head Google’s way.

So we are still where we were three months ago, Microsoft may make another friendly deal with Yahoo by upping their bid, start hostile takeover fight to replace search engine firms board or simply give up and abandon the bid. Or in Steve Ballmers words “There’s the friendly deal, there’s an unfriendly deal, and the third path is simply to walk away. We ought to announce something in very short order.”

All we know is that Microsoft’s plans are imminent.

We are still waiting!?!

What a week in the search engine marketing (SEM) industry. It all seems to be kicking off with all three of the search engine heavyweights slugging it out for supremacy. Yahoo seems to be the most animated at the moment in the wake of Microsoft’s take over bid for them. The threat of acquisition has ignited Yahoo into action. It appears they have now resorted back to their old ways. Back in the day when Yahoo was Overture they used to use partnerships as a means of gaining market share. Yahoo seems to be going down that road again.

It has been reported in the New York Times that Yahoo have been in talks with AOL, a unit of Time Warner, to form a partnership that would combine both the companies Internet operations. If this was to occur than AOL-Yahoo would be valued at around $10 billion. Yahoo would also receive a large proportion of cash from Time Warner in exchange for 20% of the Yahoo and AOL partnership. With these additional funds it would allow Yahoo the ability to buy back several billion dollars worth of Yahoo stock and protect them from the growing hostel threat from Microsoft.

Yahoo has also made another show of strength in the field of search engine marketing (SEM). In the area of analytics Google owns Google Analytics and Microsoft have their adCenter Analytics service which is still in its beta stage. So not to feel left out it appears Yahoo is getting in on the analytics action as well. Yahoo has just brought Tensa Kit, which owns the IndexTools web analytics service. However IndexTools is a fee-based product so I’m guessing that in time Yahoo will make this analytics service free because both the analytics services from Google and Microsoft come at no charge. This is a strange move on Yahoo’s part because they already own a set of analytics tools which are offered by Keylime Software. So we will see what free analytics package Yahoo decides to other. That is if they decide to offer a free analytics package at all?

But the biggest shocker this week has been Yahoo’s announcement that they have struck a deal with Google that would mean that these two search engine heavyweights will be sharing advertising space. Both companies have agreed to run a two-week pilot which will see Google’s paid search adverts run alongside Yahoo’s on Yahoo’s search engine. The pilot will only apply to www.yahoo.com and will be limited to no more than 3% of Yahoo! search queries in the US.

So does this mean Yahoo has a longer term plan to join with Google AdSense for Search program? But let’s look at this relationship realistically, between them Google and Yahoo control around 80% of the US search engine market. With this in mind, a formal partnership between Yahoo and Google would surely be deemed anti-competitive and be blocked by US regulations over competition.

So if this Yahoo-Google alliance cannot work out to be long-term relationship than why is Yahoo taking part in this trial. Is this move a desperate attempt to generate more revenue for Yahoo to help battle off Microsoft? Or are they trying to show Microsoft that Yahoo is still a major player in the field of search engine marketing and has other options available to it.

As an observer I must admit that every play Yahoo is currently making in the search engine marketing arena seems to be very timely in light of Microsoft’s takeover bid. But again maybe I am wrong, maybe Yahoo is simply showing the search engine marketing industry that they are still a player - and a major one at that - and can thrive on their own.

Either way it is obvious that Yahoo have now suddenly stepped up their game in search engine marketing and are exploring all strategic alternatives to help maximise their stockholder value which includes the exploration of potential industry partnerships. But a partnership with Google? This isn’t really going to work long term….is it?

Forget Star Wars, Search Engine Marketing (SEM) is feeling the force of the “Ad Wars”. As I mentioned in my last blog post Google recently brought DoubleClick Inc, an Internet advertising Solutions Company, so that they would have a better vehicle for selling display ads. In response to this Microsoft strengthened its armoury in search advertising by purchasing aQuantive, the parent company to Avenue A, Razorfish, Atlas and DRIVEpm, for $6 billion.

Now Yahoo has exposed their hand and unveiled their new move in the search advertising industry. Yahoo’s “Apex” project called AMP! is a new advertising management platform to rival Google and Microsoft in search advertising. Yahoo state that AMP! has been designed to streamline and automate online advertising across a variety of target markets, publishers and ad type. The advertising management platform will feature an open API and will include Yahoo! owned-and-operated inventory and more than 600 US newspapers in their Newspaper Consortium.

In a statement Hilary Schneider, Yahoo! EVP of Global Partner Solutions, announced that “While online advertising grows more sophisticated, the process of doing business today is surprisingly cumbersome and manual,” He believes that the AMP! Platform will help remedy this because it can deliver a faster, easier, and more automated and integrated way to create, buy, and sell advertising.

This new advertising platform is still several months away from being released for the general public to use, but Yahoo aims to go live with this new advertising platform by the third quarter of this year. Now Yahoo has invested significantly in the AMP! platform technology so it will be interesting to see if they can deliver on their promise to overcome the inefficiencies that they currently say are constraining the online advertising industry. Let’s see if they really have produced an advertising platform that, in their own words, is “faster, easier, and more automated”.

I personally think the exposure of their new advertising management platform is a strategic and well timed move to help put pressure on Microsoft to up their bid for Yahoo. This is because this new announced about their advertising management platform comes in the wake of Microsoft’s ultimatum that they have a deadline of three weeks to decide whether to accept their $41 billion takeover bid. Microsoft has warned Yahoo that if a deal hasn’t been reached by April 26 2008 then they would launch a hostile takeover at a lower price.

In an official letter to Steve Ballmer, Chief Executive Officer of Microsoft Corporation, the board of directors at Yahoo wrote; “Our Board has reviewed your most recent letter with regard to the unsolicited proposal you made to acquire Yahoo! on January 31, 2008. Our Board carefully considered your unsolicited proposal, unanimously concluded that it was not in the best interests of Yahoo! and our stockholders, and rejected it publicly on February 11, 2008. Our Board cited Yahoo’s global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as its substantial unconsolidated investments, as factors in its decision.”

However the letter does than go on to say “At the same time, we have continued to make clear that we are not opposed to a transaction with Microsoft if it is in the best interests of our stockholders. Our position is simply that any transaction must be at a value that fully reflects the value of Yahoo!, including any strategic benefits to Microsoft, and on terms that provide certainty to our stockholders.” So it is clear that Yahoo is not opposed to the takeover bid! Their letter clearly expresses that Microsoft have simply not offered what they feel reflects the true value of their company. In the letter they seem to have also made sure that Microsoft are aware of their new investments into advertising platforms in fact they deemed it a “significant” investment.

Can you now see why I’m suspicious of this sudden and timely launch of this new advertising platform? To me it just seems as if Yahoo are now just simply getting out the best china and cutlery and generally pulling out all the stops to hopefully get a better bid price out of Microsoft. However I could be wrong, Yahoo could simply be trying to boost the public’s confidence in their Search Engine to show that they are still a heavy weight contender in the Search Engine and Search Advertising industries and have nothing to fear from the likes of Microsoft.

Well either way we do not have long to wait! It will be interesting to see what move Microsoft now makes if Yahoo does not meet their three week deadline. Will they be impressed enough by Yahoo’s best efforts and dig deeper into their pockets? Or will they tighten the purse strings and become hostile towards them. What will be the next episode in the Ad Wars? I wait with bated breath!