MSN Live Still Trying to Buy Yahoo?

The way to better compete with Google, according to Microsoft CEO Steve Ballmer, is to achieve more ad relevance and get more people searching on MSN Live Search. During a presentation last week with Wall Street analysts, Ballmer admitted that this strategy posed a bit of a dilemma since users will search more if there are better ads, and advertisers will only come if there are more searches. Ballmer said the company will have to spend about $1.5 billion in research and development to drive better search results.

For months Wall Street has been expecting Microsoft to buy Yahoo to catch up with Google, but Microsoft SEO Steve Ballmer has thrown in the towel. "We were talking about 40 whatever blah blah blah billion. And then we were talking about a search deal. And then we weren't," Ballmer said. "There's nothing under discussion between the two of us. We had a set of principles. We talked about them. It didn't work out. Fine. We're done! We can move on."

"People say we have to buy this," he added. "We say no. It was always a tactic, not a strategy. Frankly, without a big commitment to buy Yahoo our flexibility to reinventing the search and advertising model is greater. If we had put 40 odd billion dollars out there, we'd have to lock into the current economic model."

Much to Wall Street's disappointment, Ballmer said he would not discuss the company's plan to drive organic growth now that it isn't buying Yahoo. He didn't, however, close the door entirely to the possibility of Microsoft buying Yahoo one day. "Does that mean nobody will ever talk to anybody again? I suspect the answer that question is also no. It's a long time and a big world."

Ballmer now pledges to intensify efforts to go after Google and the online ad market. As part of Microsoft's new game plan, search executive Satya Nadella says the company will begin running its Live Search service and paid ads on Facebook this fall.