Commentary

Microsoft + Yahoo = Win for Google

by Todd Friesen , October 30, 2009

Last week I had a very interesting phone call with the Department of Justice and the Washington State Attorney General's office. It was all part of the ongoing investigation into the pending Yahoo/Microsoft deal. For about 90 minutes a handful of lawyers asked me what I thought of the deal and how SEO worked from the agency side and from the client side. They also had some questions about how Yahoo Search Submit Pro (paid inclusion) worked, and why I felt it really did make Yahoo's search results better (which it did -- but you naysayers can argue over a gin and tonic with me at a conference anytime you like. And, you have to buy).

It was a very intense 90 minutes that forced me to really think through this whole deal for several days prior to the call. I think it's a terrible idea that will be really bad for everybody except Microsoft. Funny how Microsoft is involved in a deal like that, eh?

Want to know why I think that? You're going to have to keep reading. (If you don't care, I'll meet you in the bar for that gin in 10 minutes...)

The first piece I'll address is that, in my opinion, this is truly an anti-competitive deal. Currently we have three main search engines. That's three opportunities to be in the top 10 somewhere. Two of those opportunities are certainly smaller than the other one -- but how does changing that to two opportunities help competition? Retailers will now be fighting over less real estate, and consumers will have fewer selections. Clearly I'm assuming that Microsoft is simply going to bolt their search technology onto Yahoo.com and return similar if not exactly the same results as they do on bing.com. This could have been easily fixed if Yahoo had kept Search Submit Pro. Microsoft would have gained the market share they wanted, Yahoo would still have different enough results to keep the game interesting, and there would be a solid revenue stream in the mix as well.

Next, one of Microsoft's big arguments for why all of this is a good idea is that it will drive innovation by forcing everyone to move faster. Hold on here... Microsoft? Innovation? Bing is the culmination of years of work and billions of dollars of spending. Sure, it's better than anything Microsoft has done so far, but I'd hardly call anything there innovative right now. Meanwhile, Google is launching new features and innovations like crazy. In fact Social Search launched just this week, and Google's beginning to roll its new music search based on a deal with Rhapsody.

I simply don't see how consolidating the bottom of the market will innovate anything. Remember, the bottom of the market features two very large, very slow-moving companies that have made notoriously bad decisions in the past few years.

Lastly, four of the biggest names in marketing banded together and wrote a letter expressing support for the deal. Shouldn't that be enough to make us all sit up and scratch our heads? Sir Martin Sorrell, John Wren, Michael I. Roth and Maurice Levy all think this is a good idea. Why? Well. That's the easy part. If this deal goes through, bid prices are going to go up for PPC, and bid management is going to be easier and cheaper on two platforms instead of three. These super-rich guys will become even super-richer.

This deal is good for SEOs and SEMs because we will get to charge more. I like that.

This deal is bad for retailers and consumers because it shrinks the ad market and ultimately offers consumers less choice. I dislike that more.

My prediction for all of this? When the dust settles, Google will pick up at least another 7% of the market.

9 comments about "Microsoft + Yahoo = Win for Google".

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kevin lee from Didit / eMarketing Association / Giving Forward, October 30, 2009 at 2:55 p.m.
Well, for better or worse PI at Yahoo is gone. As to weather the deal will be a net positive or negative for marketers and advertisers as well as for consumers that remains to be seen. Consumers rarely use more than one search engine currently. If they use more than one, it will be because the results were not sufficiently relevant on the primary engine. Someone needs to be investing in a relevance algo engine and system that can at least approach Google in BOTH the paid and organic listings. If Yahoo was unwilling to invest, they were dead. Perhaps MSFT will invest.
Reply

Allan Kuenn from Site Pro Specialties, October 30, 2009 at 3:14 p.m.

From a strictly personal perspective and from that of a PPC manager....please someone, anyone...provide some competition to AdWords. There are really only 11 positions folks...and they get more expensive every day. Its hard to convince clients to advertise on Yahoo and Bing. If they (Yahoo and Bing) are combined and have at least 15% of the market it will get a bit easier. At least Facebook gives a decent alternative on the content side.

Ken Headrick from Microsoft, October 30, 2009 at 3:34 p.m.

I think Todd's point of view is very short term oriented. We at Microsoft are pouring it on to find every way we can to compete with Google. Yahoo, is looking at the level of investment required to compete and clearly doesn't have the financial appetite to ante up over the long term and so this is their way out...in effect the process of losing them as a consumer and advertiser option is already in motion and inevitable. It is up to us at Microsoft now to make the most of this opportunity and give Google a run otherwise Google will have a monopoly in the US to mirror the monopoly status it already has in many places in the world.

Todd Friesen from Position Technologies, October 30, 2009 at 3:50 p.m.

Ken,
Absolutely my view is short term. You guys only have a short window of opportunity to get it done. If you mess it up and G does get that additional share you wind up in an even deeper hole. I'm 100% in your corner. I'd love to see MS get some share I just don't think this deal with Yahoo is the best solution but I'm wrong from time to time :)

R.J. Lewis from e-Healthcare Solutions, LLC, October 30, 2009 at 3:51 p.m.

Why will agencies and SEM firms be able to charge more? I disagree, with fewer players, their time spent and hours should be less, not more (attributable to this deal specifically). In the big picture, media fragmentation continues and the "costs" in media are less and less going to the actual publisher and more and more going to the agency doing creative and media, the intermediaries (networks, exchanges, optimization co's etc...) doing the delivery, and a dollar spent buys less and less actual media (but the media it buys is more and more effective).

Aaron Goldman from Mediaocean, October 30, 2009 at 5:04 p.m.

Todd - as always, love how you stir the pot. You make some good points. Not gonna take the bait and weigh in on the competition aspect but do want to share something I've been thinking about since this deal was announced.

With this deal taking 24-36 months to get approved and fully implemented, what is Yahoo's incentive to keep innovating in search? Especially, if MSFT is guaranteeing revenue. Accordingly, how will Yahoo keep it's 20% share over the next 2-3 years? Answer: it won't. Yahoo's already down 1.5 share points since the Bing launch. This has effectively canceled out the 1.4 point lift Bing has given MSFT. While this may not have helped Google (whose share is flat), it certainly hasn't hurt it.

More here:
http://digitalseachange.blogspot.com/2009/07/why-microsoft-yahoo-deal-could-be-good.html

And here:
http://digitalseachange.blogspot.com/2009/07/inching-along-bing-up-fraction.html

Michael Martinez from SEO Theory, October 30, 2009 at 5:30 p.m.

Hey Ken at Microsoft, here is a long-term view for you: in 10 years Microsoft will walk away from Yahoo!, leave Yahoo! without a search engine, and Microsoft will have deftly destroyed a competitor without competing.

Taking ownership of Yahoo!'s search traffic isn't going to make Microsoft more competitive with Google.

Leveraging Microsoft content in Microsoft search results -- as Google leverages Google content in Google search results -- will help Microsoft inflate its search market share value (which is based on completely bogus metrics).

Inflated page views = inflated market share.

Google figured that out long ago.

Alan Hamor from adworthy inc, October 31, 2009 at 8:14 p.m.

I agree with Michael (and Kevin) except on one issue - timing. No more than three years from now Yahoo will have transitioned to a web portal (portal?) and MS will have the challenge of facing real consumers (humans!) in a relevance battle with Google.

So far they have lost the battle for humans, preferring to draw their revenues from the corporate software side where a single relationship drives oodles more $ than a few clicks worth of revenue from hundreds of thousands of searching people.

Tough strategic shift for a mature company with a deeply geo-entrenched management focusing on a desktop-based product line!

David Pavlicko from AVISPL, November 2, 2009 at 8:55 a.m.

Todd,

while you do bring up some valid points about the merger, like 3 competitors are better than 2, it really seems like more of a smear piece against Microsoft than anything else.

Are we forgetting that Yahoo was in a downward spiral for the last year because of their failure to innovate and stay relevant? And sure, Bing isn't perfect at all (Google's still my choice for search), but to say they're NOT innovating is an untruth - have you used it for booking trips or shopping? it's fantastic. Rich snippet integration, video playback within results, visual search, better developer help, I could go on.

Let's talk about anti-competitve, shall we? How bout Google's foray into GPS turn by turn. Did you see what happened to the competitor's stocks when they came out with that last week? Add to that the fact that they're getting their hands into mp3 sales, google books, 3d modeling programs like SketchUp, and now they want to get their hands into social search.

Personally, I think it's fine - but if you're going to go after one, you have to go after all.