Microsoft/Yahoo! deal; more search competition=a good thing..

Rebecca Jennings [Posted by Rebecca Jennings]

This afternoon's Microsoft/Yahoo! search deal ends months of discussion and speculation as to how and when these two giants would finally work out how to work together, after the rebuffing of Microsoft's bid to buy Yahoo! last year.


Under the terms of the 10-year deal, Microsoft's recently launched Bing search engine will power Yahoo!'s search services, and Yahoo! will provide the worldwide sales team for both companies' premium search clients. Microsoft will pay Yahoo! an initial rate of 88% of search revenues generated on Yahoo!'s owned and operated sites.


Our take? My colleague Shar Van Boskirk posted a while ago (here) that she would like to see Yahoo! give up its drive to to beat Google, and concentrate on the elements it does do better - display media and social media. This deal should allow it to do that, devolving the competition and the significant investment involved off to Microsoft, whose Bing product showcases their determination to continue to fight.  


While this won't immediately worry Google - In the US, Google has around a 65% share of the search market, (the new Microsoft/Yahoo! combination will have around 30%) and is even more dominant in Europe, with something around 80-90% depending on market - this will create a more viable second-string player in all markets, giving interactive marketers a significant, credible alternative/additional outlet for their search spend, or at least a better incentive to run trials outside of Google.  We've already published research (subscribers can read it here ) showing that marketers should use multiple search engines, which can provide more flexible ways to reach audiences, and this deal should help convince even the most stubborn budget-holder that spreading their money outside of Google would be beneficial.


Our recently published US Interactive marketing forecast (see Shar's post about it here) shows that search spend is forecast to continue to grow at around 15% a year, to over $30bn in 2014 in the US alone - which explains why Microsoft is so keen to play in this market. With a 30% share of the US market, this gives them enough muscle power to start disrupting the current status quo - by being more competitive on price, for example. For interactive marketers, another strong competitor can only be a good thing. Your thoughts?

Comments

re: Microsoft/Yahoo! deal; more search competition=a good thing

Hi Rebecca-Completely agree that competition is a good thing for advertisers and consumers, and it seems like the combination of MS technology and Y! advertising sales capabilities is a powerful one.I do hope, though, that Yahoo! will indeed leverage its unique opportunity to figure out their display business, as systemic challenges - not just cyclical ones - threaten an entire industry. The social web introduced fundamentally changing user behavior, and advertisers as much as publishers are struggling to recognize, embrace and effectively address this trend to remain relevant to consumers.While search will always be a key ingredient in any marketer's budget, let's not forget that consumers can only search for what they know - which is where next generation brand building comes to play.http://twitter.com/Britta_SF

re: Microsoft/Yahoo! deal; more search competition=a good thing

I'm hoping for a true competitor to Google which will be a great thing for advertisers and consumers. I am concerned, however, about what happens during the "purgatory" before the Feds approve this deal. If either loses additional market share, they might not be able to make comeback.

re: Microsoft/Yahoo! deal; more search competition=a good thing

Finally Microsoft has reached a deal Yahoo for an internet search partnership. Will the newly announced deal between giants Microsoft and Yahoo be a good thing to them and bad to Google? Got to wait and see. I was just curious to know all the past negotiations between Microsoft and Yahoo so collected all the articles and links (more than 200) related to the current merger and the previous events or negotiations between Microsoft and Yahoo. If you are interested check the link below.http://markthispage.blogspot.com/2009/07/saga-of-microsoft-and-yahoo-from-2007.html