Will Yahoo And Microsoft Just Do It? If So, How?

Yesterday’s news about Yahoo’s layoffs was well received by Wall Street (which seems to love layoffs in every sector except its own), and part of the optimism about Yahoo’s future seems to lay in folks expecting Yahoo and Microsoft to finally get around to doing a search deal. I’ve written over and over that I think the two should do this, but as time goes by and the machine at Microsoft continues to iterate on its own internal search play, I find it harder and harder to see how such a deal actually gets done, at least when it comes to organic search.

Now, I predicted in January this deal would get done, of course, so I kind of have a dog in this fight. But recall how I predicted it would go down:

“Microsoft will gain at least five points of search share in 2009, perhaps as much as 10. This is a rather radical prediction, I know, but hear me out. I think Redmond is tired of losing in this game, and after trying nearly every trick in the book, Microsoft will start to spend real money to grow share (IE, buying distribution), while at the same time listening to the advice of thoughtful folks who want to help the company improve the product. However, search share is half the game, as we know. The second half is monetization, and Microsoft will continue to struggle here, unless it manages to buy Yahoo’s search business. Which it won’t, because….

6. Yahoo and AOL will merge.

7. However, in the second half of the year, Microsoft will buy its search monetization from the combined company.”

That’s some pretty damn specific predictions, now that I think about it, and it depends on a lot of stuff happening that is out of Microsoft’s control (AOL merging with Yahoo!) but I think the idea of combining search monetization efforts still makes sense. Yahoo has tons of distribution. Microsoft has tons of money. Both have a common enemy. We shall see.

Meanwhile, Bartz’s bluntness is still pretty damn provocative. Here’s a quote you have to love if you work in product management at Yahoo:

“We sort of had one product management person for every three engineers, so we had a lot of people running around and telling people what to do, but nobody was doing anything,” Bartz said.

Yow!