Microsoft and Yahoo! reached a sensible resolution to their long courtship when the companies struck a deal that marries Microsoft’s Bing “decision” engine to Yahoo!’s advertising sales force. Bing will power Yahoo!’s search engine, while Yahoo! sells ads to premium search advertisers. Each company comes away from the deal playing off its strengths – Yahoo! remains the Internet brand and media company it should be, and Microsoft can stay focused on technology while gaining momentum for its fledgling Bing.
Few believe the two companies have a serious chance to overtake Google in search volume and advertising revenue. However, by pooling users from Yahoo! and Microsoft, the new partners will become strong second-tier search brands with serious “cred” in advertising and technology. The deal will give Google a bigger object in its rear-view mirror, and maybe put Google’s sometimes quirky mis-fires (Google’s Catalog, Notebook, Video, Dodgeball, Lively, etc.) under much-needed scrutiny.
It’s a complementary deal. Yahoo has as strong local offering (Yahoo! Local), personalized portal platform (My Yahoo!), and of course, its Yahoo! Search, which made Yahoo! a household brand long before Twitter and Facebook captured the limelight. With Bing powering Yahoo!’s search button, Yahoo! can focus on extending its audience reach and revenue streams with better display advertising features and mobile presence while burning fewer engineering cycles chasing Google’s dominant Web search engine.
Microsoft comes away with a satchel full of technical gems for Bing – first and foremost, Microsoft immediately gets a new set of learnings from Yahoo!’s impressive search volume. The analytics alone from user and search-click behavior will put a bright new sheen on Bing’s algorithms, relevance, and usefulness--all takeaways Microsoft dearly wants for its latecomer Bing. The deal also says that Microsoft will be licensing Yahoo!’s core search technologies. This means Microsoft will be able to cherry-pick the best parts of what Yahoo!’s learned over the years, especially around categorization, something that Google lacks and is often criticized for. Microsoft also presumably gets insights from Yahoo!’s local search – the last mile of the highly coveted premium revenue stream that is golden for capturing the growing mobile user share.
Looking at it from a broader platform perspective, the deal makes Microsoft’s AdCenter the centerpiece of both Yahoo! and Bing’s self-service advertising platform. Search Engine Marketers (SEMs) have one less search engine to learn in order to boost their client s’ product and service ranking in paid search results. And it will be interesting to see what differences remain once Yahoo! and Bing continue on as their own brands and user experiences, but with the same base search engine under hood. How will the experience differ? What user demographics will emerge? How will revenue compare? What types of advertisers will gravitate to each brand?
In the end, it’s good that the deal is done. General consensus is that Yahoo! and Microsoft have forged an equitable partnership; it’s a deal that doesn’t exchange billions of dollars in a day, yet it is one that should bring some order to a hyper-competitive and often volatile market. You can argue that neither company is selling out or betting the farm, but it’s time both of them came to the table and did the deal, ended the speculation, and get on with the businesses they are best at.
Subscribe