Microsoft’s offer to purchase Yahoo! raises many questions regarding the potential impact upon the industry overall. One area where the combined entity would have a particular strength is the availability of online display ad inventory throughout their network of properties. For the week ending Jan. 26th, 2008, the market share of all Internet visits for Yahoo! properties was 13.2% and 2.3% for MSN (for chart, please see Bill's blog post).

Each company exhibits strengths in attracting traffic to their front pages and delivering the traffic to other properties within their networks. The front page of Yahoo! (yahoo.com, ranked 4th in market share of visits among all categories) sends 65.78% of its downstream traffic (based upon the top 100 websites) to other Yahoo properties. For MSN (msn.com, ranked 8th in market share of visits among all categories), the front page sends 52.43% of its downstream traffic to other MSN properties. There is little overlap between the networks at this point – only 1.4% of the downstream traffic from yahoo.com visited an MSN property afterwards and 3.96% from msn.com visited a Yahoo! site.

Both websites are also strong in retaining their traffic – 93% of the traffic to yahoo.com and 89% of the traffic to msn.com for the week ending Jan. 26th had visited in the last 30 days

Web-based email services and search are the top destinations for the traffic from the portals, the combined downstream traffic to these properties from yahoo.com and msn.com were 47% and 31% respectively. Email is also good for sending traffic back over – Yahoo! Mail and Windows Live Mail each sent 12% of its downstream traffic for the week ending Jan. 26th to their network front pages.

One category where each of the portals is delivering visitors outside of their own networks is Social Networking. The charts above show illustrate that MySpace is the 3rd ranked recipient of downstream traffic for both yahoo.com and msn.com. MySpace is currently the leader within the Social Networking and Forums category (ranked 1st with 42.14% market share of visits) and receives close to half of the total category downstream traffic from both websites.

MSN and Yahoo! both have diversified properties with significant positions in the marketplace that offer attractive ad inventory, so hopefully a combined MSN and Yahoo! could also take advantage of Microsoft’s investment in Facebook.

Heather Dougherty

Heather Dougherty is Director, Research at Hitwise. This piece originally appeared on Hitwise's analyst blog here.

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