The Yahoo-Microsoft Agreement One-Pager

  |  August 17, 2009   |  Comments

A snapshot of what the Yahoo-Microsoft deal means for digital marketers.

The pending Microsoft-Yahoo partnership is obviously big news in the search world. With Bing having launched just two months ago, and already gaining market share, what could a Bing-Yahoo alliance do to the share of searches? Should Google be scared?

Coverage has been rampant, so here's a quick snapshot of what's happening.

Key Details of the Agreement

First, it's not being called a "merger" or even a "partnership" -- the official press release, "Microsoft, Yahoo! Change Search Landscape," very deliberately refers to the alliance as an "agreement" or a "deal." As per the release, "Microsoft will now power Yahoo! search while Yahoo! will become the exclusive worldwide relationship sales force for both companies' premium search advertisers."

In short, Microsoft will now power the organic and paid search results for both Microsoft and Yahoo sites, while Yahoo will continue to employ its proprietary search technology in other online media products, such as its display advertising services. Basically, Yahoo is bowing out of directly competing in search, but will leverage its established brand name and sales force to bolster advertiser revenue to the benefit of both companies.

What The Engines Are Saying

Both companies are extremely excited about the agreement, which simultaneously gives:

  • Yahoo the opportunity to refocus on its core business, which is providing compelling user experiences and advertising opportunities through digital content.

  • Microsoft the size and strength it needs to really compete with the unnamed conglomerate search engine that everyone and their mother uses.

The press release repeatedly refers to "scale." Alone, the engines could not compete against Google, but together they stand a fighting chance.

The two companies maintain that the deal is going to be good for both users and advertisers. As per Yahoo's blog post, "What Our Microsoft Deal Means to You," and the video by CEO Carol Bartz, there are a few key benefits of the deal.

The obvious benefit is the impetus it places on the industry for continuous improvement. Rather than just one engine dominating 70 percent of the search space, you'll now have some healthy competition, which is a great ingredient for innovation in any category.

Second, the deal affords Microsoft the deep pockets to continue investing in its search technologies, which brings the promise of more relevant search results and a better user experience. Improved user satisfaction translates into higher search share and ultimately more opportunities for advertisers to reach their target audience. Finally, advertisers can look beyond Google to a viable paid search alternative.

And it will be easier for them to do so. With a consolidated sales force and vendor relationship, advertisers can simplify their relationships to a single point of contact -- the Yahoo sales force. In addition, a single advertising platform -- Microsoft AdCenter -- will enable easier implementation and management of campaigns outside of Google.

By offloading the search side of things, Yahoo can get back to what it does best and focus on improving and enhancing its online properties. This will benefit both Yahoo users and online display advertisers.

So, Should Google Be Scared?

To answer my rhetorical question from earlier, I think yes, Google should be scared -- at least a little bit. On their own, Yahoo and MSN/Bing represented roughly 20 percent and 10 percent of search share, respectively. Now with a 30 percent share, the benefits we reviewed earlier could have a much bigger impact than simply the sum of two parts. If I were Google, I would be upping my game moving forward.

It will be interesting to see what happens when and if this deal comes to fruition (it still needs to undergo review and approval by industry regulating bodies). I'm excited as both a search engine user and advertiser to see what a little competition is going to do for the industry.

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Julie Batten

Julie is a member of the senior strategy team at Klick Health, focused on online media and digital. Julie initially established and led the media practice at Klick for several years, relinquishing leadership to expand beyond media into additional digital tactics. She brings a wealth of experience in search marketing, digital media, and all facets of digital strategy to bear, helping Klick's clients develop innovative digital solutions. As her role has evolved, so have her contributions to ClickZ, which she has been writing for since 2007.

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