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Microsoft, Yahoo! Now What?

The dust has begun to settle in the Microsoft/Yahoo! deal that took place last week. Now we can finally begin to see what it really means… or can we? This specific topic can be broken down and analyzed in a million different ways. The implications on SEO, ad space, search engine market share, user interface changes, budget constraints, layoffs, and the list goes on and on. For my sake, and for your sake, let us cut through the fat and see what this new deal means at a foundational level, cut and dry.

So… What just happened?
On July 29th, 4:55am Carol Bartz, CEO of Yahoo!, posted on the Yahoo! blog that they had just signed a major search deal with Microsoft. The deal entailed that Yahoo! will be giving up their search technology, paid listings and organic listings, and lease Microsoft’s as of 2010. If everything goes as planned, a full transition will happen by 2012. Yahoo! will continue running their Premium Search throughout this new deal.

Running search technology is costly, and rather than own it, Yahoo! felt it was an economical decision to lease Microsoft’s and concentrate on what they do best, be a portal. Essentially, by leasing search, Yahoo! is able to optimize what Bartz refers to as “properties” such as news, sports, finance, email, and messaging.

This approach has already caused some confusion. It is important to realize that although Bing will be running the back end of search for Yahoo!, the results will still be dressed up as Yahoo’s results. The only real difference is that the bottom of the results will say “Powered by Bing” or something along the same lines. It will be interesting to see how this is going to affect local search since both Yahoo! and Bing have their own Local pages.

Microsoft’s massive attack on Google really launched with the release of Bing. As mentioned in previous blog posts, I believe that Bing will be gnawing away at smaller search engine’s market share but will have a tough time taking on Google. The lease of their search technology to Yahoo! is yet another strategy to gain some ground, hence, Coopetition (Cooperation + Competition). Although Yahoo! and Bing are technically competing, they are joining forces to take on the powerhouse we know as Google. Think of it as a David v. Goliath situation where Yahoo! is the rock that Microsoft is throwing. As Bartz put it, the new deal will lead to better competition “Competition equals innovation. But with one player dominating 70% of search, that field has been pretty lopsided. This transaction will create a healthy competitor that’ll keep everyone on their toes.” It is certain that both Microsoft and Yahoo! believe that if they hope to succeed, they must work together.

Make no mistake of it, although Google has not radically changed their user interface or rubbed new features in our faces, they are still making headway. Just like Yahoo!, they offer applications that simplify every day life and constantly improve them through the use of Google Labs. Just recently, they removed the Beta label from their AdWords service, improved their “Show More Results” link, and launched a traditional advertising campaign to promote their apps. The latter of the three is a blatant response to Microsoft’s Bing campaign. Although we are not used to seeing Google use traditional forms of advertising, this clearly shows that Google is willing to adapt and mix it up to keep what is theirs.

What’s Next?
Microsoft is throwing everything but the kitchen sink at Google. In Microsoft’s defense, they are actually making some headway. However, overthrowing a competitor who holds 70% of the market share is no simple task, especially when that competitor is continually evolving in subtle but effective fashion. We can eternally dwell into the depth of this new deal and analyze every aspect of it. The bottom line is that Microsoft is following an aggressive attack plan on Google. As the two companies already established on Wednesday, they have “options” which means that many details are still to be determined. It truly is an unpredictable outcome. There are speculations and heavily weighted odds but one should never rule out any outcome. The tortoise has beaten the hare, the mouse has scared the elephant, and it’s possible that Bing could defeat Google.

For more information on the Microsoft Yahoo! deal visit:

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One Response to “Microsoft, Yahoo! Now What?”

  1. Joseph Moore Says:

    Google, the master cant react, it’ll act.

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