I’m guessing that anyone reading our blog is probably already aware of the agreement reached between Yahoo and Microsoft in July, 2009 to join forces for Internet search. Much has been written about this deal but I thought I would summarize what I believe are some of the important aspects of this deal for the small business audience we serve.
I feel that the most significant item, from a technology perspective, is that under the terms of the deal Yahoo! will be abandoning its search technology and replacing it with Microsoft’s, which it will lease from Microsoft. They are positioning this as a cost-cutting move. Carol Bartz, CEO, Yahoo!, during a call with media announcing the deal, said that partnering with Microsoft will allow Yahoo! to ”share the investment expense to scale the market.” However, in my opinion, Yahoo! has realized that under its search technology has not been able to remain competitive with Google, and only Microsoft has the resources to compete with Google.
In reading the transcript of Ms. Bartz’s remarks, I found it interesting that she seems to be trying to re-position Yahoo! away from being just a search engine. She said, in apparent reference to Google, “we face a formidable competitor in one aspect, and that aspect is search.” Here are a few of her other comment along this line:
- “Our vision is to be the center of people’s lives online …”
- “Yahoo! is a place where millions go every day to see what is happening with the people and things that matter to them most. We’re the largest online media company in the world. We’re number one in news, sports, and finance, and a leader in key entertainment properties.”
- “Again, to be clear, Yahoo! will continue to offer search for Yahoo! properties and users.”
What did she mean by “one aspect.” If you’re thinking about Yahoo! what other ‘aspect’ else do you think about if it’s not search? Reading her comments I cannot help but feel that she is trying to re-define Yahoo!’s business model.
One writer went so far as to pen an eulogy for Yahoo! as a search engine (read A Search Eulogy For Yahoo).
Steve Ballmer make it very clear why Microsoft made this deal: “… creating really a strong number two player in search and search advertising.” Microsoft’s MSN Search (now called Bing) has been #3 in the search engine game forever and no matter how much money Microsoft threw at it they were never able to gain market share on Google (or Yahoo!).
I believe that at the end of the day Microsoft’s target is Google. With this deal they are now at least part of the Internet’s #2 Search Engine, combining the Yahoo! and Bing market share. “The agreement allows for both companies to focus on key areas,” Ballmer continued, “Microsoft’s deep investments in search and search advertising platform technology, and Yahoo!’s deep focus on consumer online experiences.”
The New Playing Field
Here’s how the main search engine players break down market share according to the most current (Aug. 21, 2009) comScore Media Metrix Search Engine Ratings (view) :
- Google = 43.7%
- MicroHoo = 41.6% (Yahoo! 28.2% plus Bing/MSN 12.8%)
It will be interesting to see how this plays out over the new year!
Google’s approach is “relevance” and the new search engine in Yahoo will use the Microsoft “Decision” approach. Unlike Google, Microsoft tracks user actions and associates these with the Users. They then try to “think for you”, which may be a good approach in theory, but Microsoft has traditionally been terrible at this. It traditionally has made 2 or 3 step processes (such as the file search on your computer) into 3 or 4 step processes. MS abstracts processes in an effort to make things “easier”, but they generally come up with the opposite effect. More steps creates a new learning curve and is more complicated.
Also, Google tracks actions anonymously, so that when the government demands information on specific user actions, they are not willing or able to accommodate. MS may be gaining market share, but consider the ethics and performance of MS before you help build their market share.
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