

We don't doubt reports that Yahoo and News Corp. are talking – given Yahoo's desperate state of affairs, who wouldn't the company talk to?

The real question is this: What would Yahoo get out of a partnership with News Corp., other than bitter heartache when the relationship sours?

A potential deal could be structured so that News Corp. gets a 20-plus percent stake in Yahoo, according to a Wall Street Journal report. Under the agreement, MySpace and other News Corp. properties would be combined with Yahoo.

Although News Corp. CEO Rupert Murdoch (right) has shown a keen interest in the internet – as evidenced by his $580 million acquisition of MySpace – we remain highly skeptical of the reports. Buying a stake in Yahoo is a pretty pricey way for News Corp. to grow its online presence.

And while the deal could, theoretically, stave off a hostile bid from Microsoft, it wouldn't help Yahoo grow its search business, which is one of its biggest problems at the moment.

"A News Corp. deal would do nothing to solve Yahoo's decline in search market share," says Kevin Lee, executive chairman of Didit, an online advertising buyer. "It would allow Yahoo to create a larger display advertising property, but Yahoo already has more than enough of that inventory. I'm having a hard time understanding why this deal would happen."

We don't really get it, either, but if we had to guess, we'd say Yahoo is just toying with Microsoft in hopes of getting a higher bid.

Photo: Flickr/Jonkeegan

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