Friday's dramatic bounce in Yahoo's stock on reports of a deal with Microsoft -- later discredited, reflects the pressure facing the third- and second-largest internet companies as they struggle to gain market share from Google, according to analysts.
Microsoft's US$44.6bn bid to buy Yahoo could backfire if not executed properly, according to analysts -- but the phenomenal price may be worth paying to fend off the challenge from Google.
Although Yahoo executives speaking at an online ad conference on Monday were mum on Microsoft's takeover attempt, they were quick to tease a new feature -- due out this week -- on their home page which could be their rumoured competitor to social news aggregator Digg.
In a bid to boost its presence in advertising, Microsoft said Friday that it will pay US$6 billion to acquire Aquantive, a digital marketing and services company.
update: In its largest acquisition yet, Google has agreed to pay $3.1 billion in cash for online ad company DoubleClick, the companies announced on Friday.
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