Microhoo Could Heat Up the Online Ad Battleground

Analysis: Microsoft's bid for Yahoo will liven the online ad market ... if the software giant can tuck in Yahoo's assets properly.

If Yahoo accepts Microsoft's $44.6 billion purchase offer, the combined entity could help slow Google's march in the Internet market, but Microsoft will have to rationalize several disparate software products while competing with Google in search, online ads and software-as-a-service applications.IDC analyst Karsten Weide said a merger of Yahoo and Microsoft would create a stronger competitor to Google and provide advertisers and consumers with better products.Consider that Google's gross U.S. Internet advertising market share was 32.5 percent in the third quarter 2007, compared with Yahoo's 16.5 percent and Microsoft's 6.2 percent share, Weide wrote in a research note Feb. 1. A combination of Microsoft and Yahoo would give Microsoft a 22.7 percent share.This is still less than Google, but it would give Microsoft more firepower and would give it a better fighting chance against the market leader, particularly where display ads are concerned.Google calls Microsoft's bid for Yahoo troubling. Read more here.Yahoo was the top display ad publisher property with 18.8 percent of display ad views in November, the most recent available numbers from comScore, while Microsoft had 6.7 percent. Together, Microsoft and Yahoo could have 25 percent of the display ad market, compared with Google's paltry 1 percent share.Having strong display advertising is a plus, but Google still has at least 60 percent of the search market, and advertising follows search. Thus, Microsoft's best opportunity to topple Google in online advertising may be to leverage Yahoo's strong mobile ad position.