Search: Google versus Microsoft 69 Microsoft's bid for Yahoo For Microsoft, the competition meant nothing but pain. As 2008 began it made an audacious $45 billion bid for Yahoo, now the second-largest web property (after Google), offering a 62 per cent premium on the stock price. The logic behind the deal was straightforward enough: by powering its search, Microsoft could get the scale it needed to make Bing pay off. Yahoo was the biggest advertising billboard on the web, full of news content, offering e-mail, all opportunities for advertisements that could be driven through Bing. The deal was poisoned, though, by Yahoo, which had cooked up a series of internal forecasts suggesting that the company would grow much bigger and be worth far more than a measly $45 billion. The forecasts were wildly wrong, predicated on levels of advertising growth that required the future to be just like the previous six years ­ only more so. Yahoo's executives, led by Jerry Yang, made the wrong call once again. This time, Yahoo failed to perceive that it was at the tail end of an enor- mous financial bubble, and repeatedly rejected Ballmer. When the credit crunch hit in the summer, big advertisers drastically cut back their market- ing budgets, and Yahoo was suddenly left scrabbling for revenue. The bid collapsed, Yang was forced out, and in January 2009 Carol Bartz, a tough- talking Silicon Valley veteran, was offered the helm of Yahoo. She was more receptive to a simpler offer from Microsoft: that it would power Yahoo search and help serve advertisements. It seemed Ballmer had got what he wanted. (But even that soured: Facebook slurped up advertis- ing revenue while Bartz slashed costs, so Yahoo's revenue fell while its profits rose, and the Bing deal wasn't profitable for either. The Yahoo board fired Bartz in September 2011.) Google's identity Inside Microsoft, the awareness that it wasn't winning in search became pervasive. In February 2009, a select set of employees was invited to a `no holds barred' question-and-answer session with Steve Sinofsky, then the new head of the Windows division (who had moved over from the Office division). He was asked about the competitive threat to Office from Google's office apps.