SAN FRANCISCO - News Corp.'s Rupert Murdoch has a US$5 billion crush on the owner of The Wall Street Journal, Thomson is eyeing Reuters and Microsoft apparently is flirting again with Internet icon Yahoo.
The media mating dance that broke out this week is part of a mad scramble not to just provide the content, but to find the right mix of technology and business savvy to remain relevant and profitable amid the upheaval wrought by the rise of the Web.
"Media companies are trying to adapt quickly and they are looking for some help," said Ryan Jacob, a money manager who runs fund specializing in Internet stocks.
Even mighty Microsoft -- the world's most valuable technology company and a catalyst in the personal computer revolution -- seems uncertain about its ability to cope on its own. It currently trails both Google and Yahoo in the lucrative and growing business of selling and displaying ads linked to search terms.
How else to explain Microsoft's reported decision to renew its on-again, off-again takeover talks with Yahoo?
Although neither Microsoft Corp. nor Yahoo Inc. (Nasdaq:YHOO - news) would confirm negotiations reported Friday by the New York Post, some investors seem to think the couple could make it to the altar this time. Yahoo shares shot up more than 19 per cent Friday before settling back to finish at $30.98, up $2.80, or 9.9 per cent.
Redmond, Wash.-based Microsoft is reportedly considering paying about $50 billion, or $35 to $37 per share, for Sunnyvale-based Yahoo.
Although he doubts the deal will get done, Standard & Poor's equity analyst Scott Kessler understands why it might make sense for Microsoft and Yahoo to get together.
A combination "would address the major problem that both companies have been trying to deal with," Kessler said. "They both have a lot of users, but their problem has been translating that into higher revenue and profits. Neither has been doing it as well as Google."
Any discussion about the media's challenges and opportunities these days usually involves Google Inc., whose Internet-leading search engine has become the Web's biggest moneymaking vehicle as well as an influential gateway to other online destinations.
As the operators of the second and third largest search engines behind Google, Microsoft and Yahoo obviously may be trying to figure out if they would be better off trying to gang tackle the industry leader.
Even if they were to combine, Microsoft and Yahoo would still trail Google in the lucrative search engine race, according to the latest data from comScore Media Metrix. Google ended March with a 48 per cent share of the U.S. search market, trailed by Yahoo at 27.5 per cent and Microsoft at 11 per cent, comScore said.
"This deal can't just be about chasing Google in search because that is a losing battle," said Forrester Research analyst Charlene Li. "It has to be about creating something more powerful, something they could do better than Google."
Google's whirlwind success after just 9 1/2 years in business also has galvanized other media trying to plumb new revenue channels in hopes of approaching Google's outlandish profit margins.
In the first three months of this year, Google earned $1 billion on the $2.5 billion in revenue that the Mountain View-based company kept after paying commissions to to its advertising partners. Put another way, Google pocketed a profit of nearly $40 on every $100 in revenue.
As News Corp.'s audacious chief executive, Murdoch has been leading the more established media's charge on to the Internet. In 2005, he bought the leading online social network, MySpace.com, for $580 million. MySpace already has helped News Corp. lock up $900 million in guaranteed ad payments from Google spread over the next three years.
The Internet factored into News Corp.'s surprising $5 billion bid for Dow Jones & Co., which owns The Wall Street Journal as well as the Dow Jones Newswires and Barron's.
While the print version of The Wall Street Journal has been the leading U.S. business paper for years, the online edition's ability to attract subscribers may be even more compelling.
In an era where most news content on the Web remains free, the Wall Street Journal boasts 931,000 subscribers who pay between $79 to $99 annually to read the paper. WSJ.com's large audience of paying customers is a powerful advertising magnet.
Murdoch also hopes to tap into the expertise of The Wall Street Journal's editors and reporters to help launch a new financial news channel on cable television to compete with CNBC.
The family that controls Dow Jones so far has rebuffed Murdoch, who still hasn't abandoned hope of pulling off the deal.
Thomson Corp.'s bid for Reuters represents the latest step in its transformation from a publisher of newspapers and other print products. The Stamford, Conn.-based company now seems determined to challenge Bloomberg LP in the highly specialized field of delivering real-time financial data and news to customized terminals sold to investment bankers, money managers and stock brokers.
Reuters PLC, a venerable news and financial information service, was the longtime leader in the so-called "terminal" market. But it was overtaken by a rival operation launched by Michael Bloomberg before he became New York City's mayor. An April report from Inside Market Data Reference said Bloomberg held a 33 per cent share of the terminal market, with Reuters at 23 percent and Thomson at 11 per cent.
