Yahoo, Microsoft and search innovation

Can big fish and little fish get along?

In a much media-hyped story, Microsoft and Yahoo have agreed to an online alliance that could create a more formidable rival to Google in the search business. Please don’t scoff…

So what does this mean for search innovation?

In a courtship that caps more than two years of effort by Microsoft to secure a foothold in Yahoo’s search business as a way to challenge Google, Yahoo will hand control of its internet search technology to the software group. Although less drastic than the $48B acquisition of Yahoo that Microsoft proposed last year, the move could for the first time make it a credible long-term rival to the search group.

News of the technology alliance brought an abrupt end to the six-month honeymoon that followed the appointment of outsider Carol Bartz as Yahoo’s chief executive. ”Users will continue to experience search as a vital part of their Yahoo experiences and will enjoy increased innovation thanks to the scale and resources this deal provides.” said Bartz.

Yahoo estimates that the agreement will provide it with $500M in annual operating income and $200M of capital expenditure savings. Yahoo will be compensated by Microsoft through a revenue sharing agreement based on traffic generated on its network of websites.

What does this imply?

Bing (formerly Live Search, Windows Live Search, MSN Search) is the current web search engine (advertised as a “decision engine”) from Microsoft. Unveiled by Microsoft CEO Steve Ballmer on May 28, 2009 at the All Things Digital conference in San Diego, Bing went fully online June 3, 2009. Microsoft currently has about three per cent market share, lagging China’s Baidu with nine per cent share of search engine queries.

This agreement with Yahoo will create more innovation in this space as Microsoft will be able to concentrate its resources on search models, while Yahoo concentrates on premium search ads. By bringing together their communitie of users, it brings better value for advertisers and real consumer choice in a market currently dominated by a single company.

“The agreement will provide the scale needed to deliver even more rapid advances in relevancy and usefulness,” said Steve Ballmer.

For the advertiser and the consumer alike, we value choice. Bing it on!

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Tags: Google, ict, Microsoft, web, Yahoo