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Yahoo's strategy: Torpedo the Microsoft deal or up the offer?

There are two ways to look at Yahoo's latest move in the Microsoft-Yahoo chess game: Yahoo is either trying to torpedo the deal or trying to force Microsoft to rush into it by upping its offer.
Written by Mary Jo Foley, Senior Contributing Editor

There are two ways to look at Yahoo's latest move in the Microsoft-Yahoo chess game: Yahoo is either trying to torpedo the deal or trying to force Microsoft to rush into it by upping its offer.

Yahoo announced on April 9 "that it will begin a limited test of Google Inc.'s AdSense for Search service, which will deliver relevant Google ads alongside Yahoo!'s own search results. The test will apply only to traffic from yahoo.com in the U.S. and will not include Yahoo!'s extended network of affiliate or premium publisher partners. The test is expected to last up to two weeks and will be limited to no more than 3% of Yahoo! search queries."

Update: Microsoft's response to Yahoo's latest plan, courtesy of Microsoft General Counsel Brad Smith:

“Any definitive agreement between Yahoo! and Google would consolidate over 90% of the search advertising market in Google’s hands. This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo! We will assess closely all of our options. Our proposal remains the only alternative put forward that offers Yahoo! shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers.”

I'm really feeling the love! Microsoft and Yahoo sure are going to make great allies, if Microsoft's deal ever is consummated...Not.

Since Microsoft announced its bid for Yahoo in late January, Yahoo has done as much as possible to make itself an unattractive marriage partner. It layed off a bunch of employees, including some seemingly desirable developers. It gave those remaining very generous golden parachutes. It announced that it was backing more "open" protocols and interfaces in building out its search ecosystem. (More specifics on that one still to come, but I'd bet open-source licensing will be key here) . It joined OpenSocial, a Google-backed alliance to fight Facebook, a Microsoft partner.

This week, Yahoo announced it was buying a Web analytics company (Microsoft is building out its adCenter analytics, a k a "Gatineau," software). Last week, Yahoo bought a stake in Vlingo, a company that provides voice recognition for mobile phones (Microsoft bought TellMe a couple of years ago to provide the same exact service.)

Yahoo CEO Jerry Yang said earlier this week he isn't opposed to an acquisition by Microsoft -- if Microsoft ups its offer. But Yang also has made no bones about the fact that he is vehemently against Microsoft taking over Yahoo.

So what's really going on here?

[Poll=20]

I still think Microsoft should take all these Yahoo moves as a sign that its initial plan to buy Yahoo was a bad one, and walk away. I wonder would happen to Yahoo, at this point, if Microsoft did withdraw its offer to buy the company... I doubt it would be a positive outcome. And I bet Google would be thanking Microsoft (privately) for weakening the only search rival it currently has.

Your two cents?

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