Alternate Deal Reality: Yahoo, Microsoft Might Create a Joint Venture

Conventional wisdom says the imminent deal between Microsoft and Yahoo will be structured as a search syndication partnership. Yahoo will begin carrying Bing search technology, and Microsoft will sell the bulk of ads against those results. Yahoo would confine its ad sales efforts mainly to display, and would receive payments (and user data) from Microsoft for search activity on its domain.

However other scenarios are still being floated internally at Microsoft. According to one senior Microsoft source outside the negotiations, a joint venture has also been discussed and was rumored to be CEO Steve Ballmer’s preferred outcome.

Under such a set-up, the source said, a new company owned by both Microsoft and Yahoo would be in charge of selling search and possibly some display ads for both companies. Bing technology would presumably replace Yahoo Search, since Microooft is so keen on extending its technology.

Interesting notion, but it’s hard to imagine such a JV could serve the best interests of both Yahoo and Microsoft equally. It’s much easier to imagine this working for search than for display ads, unless both companies migrated their entire sales forces to the joint venture — almost unfathomable. On the other hand, a joint venture housing only search ad sales would go against the idea of integrated display and search ad planning.

Why would this appeal to Ballmer? According to the source, Ballmer has come to accept Microsoft just isn’t very good at sales

“Microsoft doesn’t directly sell,” he said. “It sells software through its vendor relationships… A joint venture would essentially be just a sales force.”