While the deal itself is exceedingly complex, the premise is straightforward. Microsoft and Yahoo will team up on search technology, ad platforms, and sales forces to better capture search marketing demand and better compete with Google. Regulatory approval of the deal is expected in early 2010, with full integration some 12-18 months beyond the approval date.
I have no doubt Microsoft will muster the required support to get this deal through regulatory hurdles. And it should go through on its own merits; it's largely a good deal for advertisers and the marketplace.
I also don't doubt the 12-18 month timeline proposed for full integration between these two entities. Just to be clear, Microsoft is saying the technical and operational work needed to tie together the two search platforms may take until the second half of 2011. That's a long way off for marketers looking for results that move the needle this week. But as Microsoft's chieftain, Steve Ballmer, has been known to say, "we're hard core, and we're long term."
It's the long term that is relevant here. Microsoft as a company seems to operate on a five- to 10-year time horizon. Having developed a money-printing machine (two, actually) with their Windows and Office franchises, company strategists can afford the luxury of a long-term view. They truly believe we are in the second inning of a nine-inning game where search is concerned, and it should not surprise that they are taking their time in this endeavor.
It's worth mentioning again that the tie-up between Microsoft and Yahoo, whenever it comes to fruition, is an overwhelmingly good development for advertisers. Search marketing today is still a tactically burdensome pursuit and managing synchronous search campaign across three large scale search engines fragments resources and attention. Search marketers, even those using automated bid management platforms, need to make a "return-on-effort" decision daily, and Google always comes out on top. This leaves Yahoo and Microsoft short-changed: underperforming due to lack of optimization, and underinvested due to lack of performance. Consolidating to two search ad platforms of scale (Google and Microsoft/Yahoo) will allow search marketers to focus their energy on testing and campaign development, getting more out of the query volume flowing through the Microsoft/Yahoo platform.
Beyond that, a Microsoft/Yahoo tie-up should trigger innovations in the search marketplace not seen in three years or more (that last period in which Google thought it had a legitimate competitive threat). Microsoft has actually been leading innovation in the search marketing space for some time with its AdCenter platform, but because its current query volume is so small, its innovations have gained little traction and provoked little competitive response. This will change when Microsoft's search ad platform controls nearly 30% of the market.
There is risk here, too. If Yahoo pulls resources away from the algorithmic search efforts, for example, its relevancy and user experience may decline, accelerating steady erosion in Yahoo query share. This will leave Microsoft and Yahoo partnering up for an increasingly marginal piece of the pie.
But both parties seem content to take that risk, and so the rest of us will have to wait. We may see token signs of integration seep out throughout 2010 (ad sharing across engines, perhaps, or backfilling of natural query results). And Yahoo is shuttering its paid inclusion product at the end of this year, in large part because company strategists thought it put the partnership at risk (I shed a tear for paid inclusion, a beautifully conceived and beautifully executed product).
Still, meaningful integration between the two engines is still a full year or more away. And so the biggest shift in the search marketing landscape in 2009 will likely be a non-story for most of 2010. For search marketers, the wait is frustrating. For Yahoo, too, the timeline can't be ideal. But this is a game being played at Microsoft's pace. 2010 may be a dull third inning, innovation-wise, but there's a long game left to go.