A successful Microsoft bid for Yahoo! would create an internet company with a three-quarters share in web mail and instant messaging – figures that rivals are expected to use in an attempt to derail any merger between the two companies.

Microsoft and Yahoo! have roughly equal shares of the webmail market, with each attracting about 260 million visitors worldwide in January, according to data supplied by Comscore. Yahoo! Mail is the market leader, with Microsoft’s Windows Live Hotmail close behind.

Together, after allowing for duplication, it is estimated the two companies would control 75 per cent of all web e-mail access, with 436 million visitors. Third-ranked Google, which runs the gmail service, attracted 90 million visitors in January. The total number of visitors to any mail site worldwide is put at 577 million.

Microsoft already dominates the instant messaging market, and the two combined would amass a market share of around 77 per cent. The IM market, as with webmail, has attracted little or no regulatory scrutiny until now.

Google, the company most obviously threatened by a Microsoft takeover of Yahoo!, is likely to highlight figures such as these in an attempt to persuade the European Commission, with whom Microsoft already has a poor relationship, to intervene.

This month, shortly after Microsoft’s bid was first made public, Google’s chief legal officer David Drummond hinted at the company’s thinking. He highlighted concerns that a combined Microsoft/Yahoo! could “take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors’ e-mail, IM [instant messenger], and web-based services”.

However, despite the apparently high market shares that would be created by a tie-up, it is not certain that fears about webmail would actually concern regulators because webmail and instant messaging are not major sources of revenue. Competition laywers contacted by The Times indicated that the arguments would focus on the source of profits.

Yahoo! is the largest recipient of display advertising, with Microsoft close behind. eMarketer.com estimated that Yahoo, the market leader, generated $1.38 billion (£701 million) of display revenues between December 2006 and November 2007, with MSN coming third with $422.8 million after News Corporation’s MySpace.

Other data from ComScore suggests their combined market share in US internet display advertising would be 25.5 per cent – just below the threshold that attracts regulatory scrutiny.

Google, by contrast, has a relatively small market share in display as it has yet to find a way of generating meaningful income from YouTube.

But the search engine’s problem is that it has to persuade regulators to exclude its dominance of the separate search advertising market. Google’s total advertising revenues, dominated by search, were $16.4 billion in 2007.

“What are people doing? They are buying advertising on the internet, and mostly they do that by buying search key words. Online advertising is not a separate market,” said one competition lawyer not involved with Microsoft, Yahoo! or Google, and who asked not to be named.

eMarketer’s own data estimates that search accounts for about 40 per cent of all online advertising. Google, in turn, controls an estimated 76 per cent of all search advertising revenues, with Yahoo! on 17.9 per cent and Microsoft’s MSN at 5.5 per cent.

If Microsoft can convince regulators that they should look at the entire internet advertising market, it will not face any major regulator objections.

Helping Microsoft is the stance of some of the world’s major advertisers. At the time that Microsoft’s move became public, Sir Martin Sorrell, the chief executive of WPP, the number two marketing and advertising group worldwide, said that he believed a combined group would give Google some healthy competition.

Google’s last hope is the European Commission, which is still investigating whether Microsoft has illegally linked its Internet Explorer browser to its Windows operating system.

A statement by Microsoft, in which the software company promised to make its software more accessible was greeted coolly by Brussels this week.

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