Microsoft Gets Off the Sidewalk and Back into "Local"

There's nothing like having a big brother in Redmond. That may be one of the lessons of today's announcement that Microsoft is picking up a four percent stake in CareerBuilder. The market's been watching CareerBuilder and what moves it would make in light of the Yahoo/newspaper consortium deal. So those newspaper partners took on a big brother in Sunnyvale, and CareerBuilder may feel a bit safer cozying up a bit more to Yahoo's rival (and potential acquirer) to the north. Certainly, four per cent is not much of a stake and only reduces Gannett's and Tribune's stakes a bit, to 40.8%, with McClatchy dropping to 14.4%. But why would Microsoft do it? Certainly, it can pick up seats at Wrigley Field anytime it wants already (and this perk may be gone if Sam Zell does take control of the "New Tribune" and sells off the Cubbies). Could it be that Microsoft would like a little closer seat at the table of "local," doing what it does best -- study, study, study and then act. When I heard today's news I remembered an interview with Microsoft CEO Steve Ballmer, from the New York Times in January, with this curious quote about the Microsoft's ahead-of-its-time online city guide service, which it sold off in 1999.

“But Sidewalk was really aimed at what we now call local search,” Mr. Ballmer says. “Sidewalk is one we should not have gotten out of.”

Now recruitment isn't just local, and four percent's not much of a stake. But it could be a small Trojan Horse. For CB's owners, the deal makes a good deal of a sense beyond acquiring a bit of family protection. CB's spent a lot over the years, securing prominence of its listings on MSN. This agreement commits it to pay as much as (performance-based) $443 million through 2013 for that privilege. They'd hope that in addition to their cash, Microsoft is incented to look for every opportunity to push the brand, for instance on mobile as mobile recruitment becomes more used. Beyond, that CB CEO Matt Ferguson's explanation holds water:

"Microsoft's equity stake builds on this successful relationship and establishes a global alliance with one of the world's most ubiquitous technology powerhouses. It enables CareerBuilder to continue to grow faster in the U.S. than any other job site while leveraging a strong international platform to quickly enter new markets in Europe and all over the world."

Three words: equity, technology, global.

CareerBuilder may well need to tap into some new capital sources going forward, for both technology and acquisition of niche job boards, and that gets harder as newspaper company cash flows tighten. Microsoft could well expand its stake, using one of its key assets: cash. Technology is key to the recruitment business, a dynamic one in which matching of jobs and job-fillers will become more efficient given smarter and smarter data mining and matching tools. Global is big when you look at how badly CareerBuilder has lagged Monster outside the U.S. CB is launching new European products and its ability to leverage MSN-related distribution there as well is significant. In fact, look at how "global" is increasingly playing into market moves, as Rupert Murdoch intends to make Dow Jones a truly global business franchise, using his worldwide cable pipes. And then there's this interesting wild card. What happens if Microsoft and Yahoo do really push forward with a strategic partnership, or Yahoo succumbs to Microsoft's charms and becomes a part of the empire? Do all those newspaper classified properties get combined, with the Microsoft brand appearing at top of newspaper pages and websites near you?