July 29 was truly a momentous day. First, we saw this huge re-positioning of twitter. Twitter has moved away from the social networking focus on homepage (where facebook is dominant anyways) to a people powered search engine focus– where it is clearly dominant. While that is quite significant, nothing could beat the importance of the announcement coming from Yahoo HQ & Microsoft HQ about the Search deal.
Firstly, a report about the Search Engine Market shares- US for May/June 2009- table republished here:
Some quotes from the official Microsoft press release and what they imply:
Microsoft will now power Yahoo! search while Yahoo! will become the exclusive worldwide relationship sales force for both companies’ premium search advertisers.
Microsoft would now sit on the most popular web portal in the world as its default search engine, even when Yahoo! search had a greater marketshare than Bing. This would imply that Yahoo would henceforth not benefit from any advances in the search engine industry. Note that Search engine monetization is a huge business in itself. It is a step-back for Yahoo in search, thats for sure . Yahoo has pushed itself back from a leader role to a marketer/ sales-person role in this space. It can be considered as a de-facto admission from Yahoo! that they could do nothing to stop Google’s superiority in the search engine market.On the other hand, it is even a free license for Microsoft to launch a full scale attack on Google’s hitherto unquestioned Search engine supermacy. On his recent visit to India, Bill Gates had said
Google’s in this kind of honeymoon…actually, their honeymoon is slowly but surely coming to an end. And, that’s fine. Our honeymoon came to an end and theirs has to come to end, too. And then, they will be just a normal company.
Perhaps, he gave us clues about this tieup with this statement itself. The question is, will the combined efforts of Microsoft and Yahoo have a tangible impact on Google’s marketshare?
2. The Yahoo perspective:
“This agreement comes with boatloads of value for Yahoo!, our users, and the industry. And I believe it establishes the foundation for a new era of Internet innovation and development,” said Yahoo! Chief Executive Officer Carol Bartz. “Users will continue to experience search as a vital part of their Yahoo! experiences and will enjoy increased innovation thanks to the scale and resources this deal provides. Advertisers will also benefit from scale and enjoy greater ease of use and efficiencies working with a single platform and sales team for premium advertisers. Finally, this deal will help us increase our investments in priority areas in winning audience properties, display advertising capabilities and mobile experiences.”
This statement talks big, but what are they aiming at? While I agree that Search is just one aspect of Yahoo’s product offering, its an extremely important aspect in my opinion. This deal would give Microsoft’s Bing a huge promotional push through all Yahoo’s products, most notably Yahoo! Mail. It is even a change of focus- as a Media company– for Yahoo as well, in continuation with recent changes on Yahoo homepage.
3. Clear attack on search monopoly of Google:
Providing a viable alternative to advertisers, this deal will combine Yahoo! and Microsoft search marketplaces so that advertisers no longer have to rely on one company that dominates more than 70 percent of all search. With the addition of Yahoo!’s search volume, Microsoft will achieve the size and scale required to unleash competition and innovation in the market, for consumers as well as advertisers.
This aspect of the statement is the most visionary. It shows the ambition of both Yahoo! and Bing to stake their claim on the search engine pie. Advertisers will now truly have an alternative to Google AdWords and AdSense. Once the regulatory approvals are done and this deal is in action, we could see some serious competition between the two Ad-Platforms.
4. Benefits for Bing have been clearly highlighted by Microsoft CEO Steve Ballmer in this statement:
“Through this agreement with Yahoo!, we will create more innovation in search, better value for advertisers and real consumer choice in a market currently dominated by a single company,” said Ballmer. “Success in search requires both innovation and scale. With our new Bing search platform, we’ve created breakthrough innovation and features. This agreement with Yahoo! will provide the scale we need to deliver even more rapid advances in relevancy and usefulness. Microsoft and Yahoo! know there’s so much more that search could be. This agreement gives us the scale and resources to create the future of search.”
Opinion: Is this deal ‘only bad’ for Yahoo? Not at all! On July 29, we read tweets about how Yahoo has gone down fighting etc, but I feel these were extremely myopic. Yahoo has determined that its core competency is ‘the World’s leading online Media company’ and its a huge area in itself. They are unquestionably the world’s most active portal. Yahoo may have identified its core competency perfectly here. They determined that investing resources into areas they were dominant in would provide greater returns for them, instead of fighting (perhaps a losing battle) with powerhouses like Google and Microsoft. It may turn out to be a great step after all.
But, history and market reactions point otherwise. Yahoo stock price plummeted close to 12% as a reaction to this release (Source) Also, on the web, dependency on some other site for a function like search may prove to be a death-knell. Again, by history,the reference is to the blunder Yahoo did sometime back because of which Google became the undisputed leader.
The future: Subject to regulatory approvals, Google will have a competitor to reckon with – a 28% combined market share is pretty significant. As Ballmer rightly pointed out, the more the people search, more you(the service provider) learn. A full scale search engine war awaits us, thats for sure!
PS: I have tried to be as objective as possible. Yet, I am a self confessed fan of both firms, so pardon me if I went overboard with imposing my opinions.
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