The New York Times reports that Microsoft and Yahoo have signed a non-discolsure agreement, signalling that Microsoft may be closer to buying the search engine company than we thought.
So what's in it for them?
The Yahoo CEO resigned earlier this year, due to the search engine's lacklustre performance in the marketplace. This prompted me to wonder what Yahoo's attraction to users is - their search engine is way behind google, their email is klunky, their home page is cluttered... what is there to like?
But 80 million unique visitors a month somehow end up at Yahoo's front door - poor by search engine standards, yes, but pretty good for the average website!
Yahoo groups has some traction, and some people will land on the home page having installed the Yahoo toolbar alongside some other software. There's also Yahoo answers and niche services like Yahoo finance.
Users - yes. But what about profits?
Microsoft aren't stupid, and what they will be looking for is profit. So what will they plan to do with Yahoo? My guess is that Yahoo and Live/msn/hotmail won't merge - not for years anyway. The brands have their own followers and merging would not gain users. But we will certainly see shared advert and search algorithms, and a push to capitalise on ad revenue on the same way Google has. Yahoo email users should also expect more integration with Office 365 features, another great way to push/cross-sell the Yahoo and Office 365 services.
So after some dire experiences with Yahoo mail I'll pick it up again after the merger, along with trying out their other services again, but typically I think growth will come from retention of existing customers, plus new customers cross-sold from Office, Skype, the Windows phone and other Microsoft services and acquisitions.
Watch this space!