London's Telegraph newspaper yesterday carried a report based on unnamed sources that Yahoo! Inc. (NASDAQ: YHOO) and Facebook Inc. (NASDAQ: FB) were in discussions about how the two companies could work more closely together. The focus of the Telegraph's article was search, and the point seemed to be that Facebook's 1 billion users would be a jump-start to a reinvigorated Yahoo! search engine.

This is nonsense on any number of levels, but the most important is Yahoo!'s deal with Microsoft Corp. (NASDAQ: MSFT). Yahoo!'s search function no longer belongs to Yahoo! It is currently powered by Microsoft's Bing search engine, and despite the billions of dollars that Microsoft has poured into Bing, Google Inc. (NASDAQ: GOOG) continues to get about two-thirds of all Internet search traffic, compared with around 12% for Yahoo! and 16% for Microsoft.

Now Microsoft could decide to work with Facebook on a new search engine, and Facebook's CEO has said that it plans to improve its search capability. But Yahoo! brings almost nothing to the search table in its own right.

That is not to say that a closer relationship between Yahoo! and Facebook is impossible. A closer tie among users or tighter integration of services are distinctly possible. But search? Never gonna happen.

Yahoo!'s shares are up about 0.9% in premarket trading this morning, at $18.02 in a 52-week range of $14.35 to $18.16. A new annual high is definitely in the cards today, likely based on the rumor of a closer tie to Facebook.

And Facebook stock is up 2.7% at $24.19, but that is just as likely due to continued short covering based on last week's addition of more than 800 million unlocked shares to Facebook's float as it is to a possible search deal with Yahoo!

Paul Ausick

Filed under: 24/7 Wall St. Wire, Internet, Pre-Market Activity, Rumors, Technology Companies Tagged: FB, featured, GOOG, MSFT, YHOO

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Deborah J. Boyd

I can tell you why Google is out in front of Bing. Microsoft is proprietary and I guess they view their customers as chickens that will follow anyone that looks like they have some chickenfeed. Google from day one has always tried to gain customers & consumers by treating them like partners. When the Wall St crowd stole $3 Trillion from private citizens Google, Virginia Chamber of Commerce, & Intuit teamed up to offer free service for one year for an Internet site. Google watched Verizon, Comcast, TW, etc. and answered the challenge with Kansas City, the NEW Capitol of the United Regions of the World....of GOOGLE. Get 25,000 of your friends to invest $10 USD each and you can get on the list to be a Fiberhood = Google Fiber Optics. Minimum = $300 installation for 7 YEARS ISP. I love it and I love Google. GOOGLE gets upset if I get involved with cheap, tacky companies so they hooked me up with Brain Host. GREAT! See example =

November 19 2012 at 6:40 PM Report abuse rate up rate down Reply