Speaking to CNBC-TV18, Mahesh Murthy, CEO, Pinstorm said the ad sales team needs to get integrated. He stated that it would take a year to integrate the ad sales and to come up with a meaningful offering for intermediaries.

Microsoft is in a curious position as it has virtually no play in search advertising and is number three in this business, added Murthy. However, they have more cash than Yahoo!. According to him, Microsoft is simply using Yahoo’s platform and customers and wants to buy their way in the advertising business.

Excerpts from CNBC-TV18’s exclusive interview with Mahesh Murthy:

Q: Rumors have been floating around for a while. Did the timing and the amount surprise you?

A:  Yes, rumors have been flying around for quite a bit. The timing was interesting because it came one day after Google listed its numbers, for the very first time in its history. So, Google came a penny short on estimates yesterday, which put the market on a bit of a back foot to call the stocks down. Then, Microsoft came in saying that they are offering a 60% premium to Yahoo.

The interesting thing on the search marketing front is that it is already a USD 25-30 billion business. I don’t think the Monopolies Commission would really allow Google to buy Yahoo, because it would simply take around 80-85% of the business.

Microsoft is in a curious position, in having virtually no play in search advertising. It is a very distant number three in this business. But they have more cash than Yahoo. So, it’s simply using Yahoo’s platform and customers and wants to buy their way in the advertising business.

Q: They also picked up 1.5% stake in Facebook at some crazy valuation. But they were gunning for exclusive rights to sell ads in Facebook. So, they are serious about this.

A:  Facebook is a company that is not even two years old. Yahoo started in 1994 and is valued at USD 44 billion. Facebook is valued at USD 15 billion. You cannot imagine a world where Yahoo is just 3 times more valuable than the Facebook, but that is what you get when you are in the wrong side of the technology curve.  

Q: Is there any proof that this whole search marketing business will scale up, to the kind of numbers we are seeing, because even a Facebook.com may have great valuation but is not really pulling in the revenues yet. Do you think if Microsoft and Yahoo put all their page views and user base together, that will essentially translate into higher revenues?

A: I really do not think so. Face Book is the kind of environment, which is very immersive for the viewer. The viewer does not want to click on an ad and get away somewhere else. In Google, as a search engine, you have to go and click on an ad and leave the website. So, as a result the predominant paradigm in the business is click on the ad and get away from the site.

We have run lots of ads in Facebook for a dozen of clients. We find that they work on a branding level. They give you impressions and eyeballs. But you don’t get those clicks through rates. You get that by doing the regular contextual advertising on Google.

Q: How does it work for intermediaries and other competitors? Steve Balmer, in his letter, wrote that the Yahoo board has taken a dig at them by saying that one year ago, when they spoke, Yahoo was very enthusiastic about the new ad platform called Panama, which Balmer claims hasn’t really worked. Would you agree that there is no good alternative out there in the market to Google on their advertising platform? Do you hope a merger will help give customers some real choice?

A: If Microsoft puts their software engineers to build a decent platform, to take the bugs out of Panama, it may come out to be as good as the advert platform that Google has been. But its not just about the platform. The fact of matter is that Yahoo has a very fractured sales team around the world-one team selling search, one team selling banner and display ads; they rarely spoke to each other.

Plans are to work with different contact stuff in different countries. So, its kind of a bureaucratic mess. Microsoft was even worse. So, it’s going to take a while for them to sort out a very clean way of selling advertisings. So, perhaps, as an agency, we buy from everyone. Yahoo, Microsoft and Google are all vendors to us.

We would really love to have some competition to gaud us simply because it will allow us to scale down the advertising rates. Advertising prices on Google have gone up tremendously, especially in sectors like travel and finance, and we would love to see some competition.

Q: Will there be any impact in India?

A: First of all, the ad sales team needs to get integrated. MSN is kind of confusing because it has given its ad sales to another company, which is NDTV. Google and Yahoo have their search and display team, which is vastly different from each other. So, its going to take a while. I would say give it a year. Even if it’s a bit of a success, it will take at least a year to integrate the ad sales, to come up in a meaningful offering for intermediaries like us and our clients.