Read our complete POV on the Microsoft-Yahoo deal below, or download a PDF version via Scribd (above).
Microsoft is effectively acquiring Yahoo’s search business, migrating Yahoo’s search ad customers to its adCenter platform, and licensing Bing’s search platform back to Yahoo. Yahoo will become the worldwide sales organization for the companies’ premium search advertisers, while from an ad technology perspective adCenter will be the search ad platform and Yahoo’s Panama will be phased out. Smaller advertisers will use adCenter directly to purchase their search advertising. After the deal goes into effect, both the natural and paid results on Yahoo’s owned and operated properties will come from Bing’s search platform.
Below we address a number of the key questions marketers may have regarding the deal, with 360i’s perspective on what this means for your search marketing efforts.
How does this affect Microsoft and Yahoo?
Both companies have been wrestling internally for years with their brand identities – to be a media or technology company. The consolidation of ad sales efforts with Yahoo’s sales team strengthens Yahoo’s hand as a media company. By contrast, Microsoft is doing the opposite by consolidating its technology position in search at the expense of its media sales aspirations. 360i’s assessment is that this seems like a smart strategic play by each of the parties to focus on their core ambitions and areas of expertise.
How does this impact marketers?
The most obvious impact on marketers is that there will now be two major places to buy search advertising, down from the previous three. The upshot for marketers: the partnership builds more scale and efficiencies in search advertising enabling marketers to take better advantage of Bing’s traffic.
This should also allow Yahoo to focus more on sales support, especially for its larger advertisers and agencies. Improved scale and customer support should enable Yahoo/Bing to close the gap between their combined consumer search share (28%) and advertising search share (23%) as compared with Google’s share (65% and 77% respectively), according to the latest comScore and SearchIgnite figures.
There is the possibility that cost-per-clicks will go up for some keywords, although increased relevancy from the platform’s scale might lead to increases in conversion rates, thus ensuring that ROI will be better, or at least neutral, for advertisers. Time will tell. Either way, we do not anticipate massive changes, especially given the large duplication of advertisers already running campaigns on Bing and Yahoo. We expect advertisers’ ROI should remain strong if they are proactively managing their campaigns. As it relates to SEO, optimization for Bing results will become increasingly important.
Is Bing a better search engine than Yahoo?
Bing is unequivocally the best search experience Microsoft has delivered, and it has been improving incrementally since its release. Yahoo has continued to innovate over the years, such as with products like Search Assist that helps refine queries and SearchMonkey that delivers richer natural search listings. Yet Bing has the stronger product, supported by considerable momentum and growing mindshare. Bing also excels at various specialized and vertical search fields, such as travel, shopping and image/video search.
The real challenge is giving consumers a compelling reason to use an alternative to Google. That will require smart marketing and extensive product innovation. The deal seems to be structured in a way that will give Microsoft access to Yahoo’s research and development resources, including its engineering talent. If these resources are harnessed properly, Bing will hopefully evolve further to offer the best aspects of both Yahoo and Microsoft’s current search engines.
Could this run afoul of government antitrust laws?
360i is not an anti-trust expert and can’t weigh in on this matter other than to presume that the Justice Department will likely examine the terms of the deal given their recent track record. We suspect that there will be two opposing points of view on the matter:
- Deal opponents will argue that the main players controlling over 90 percent of search advertising share is now reduced from three to two, thereby lessening marketplace competition.
- Deal proponents will argue that the partnership creates increased competition by creating a viable number 2 competitor. This argument is based on assessing the current field as being made up of Yahoo as a distant number 2 with declining market share and Bing with small, stagnant market share.
Ultimately, approval may hinge on whether advertisers and anti-trust officials believe this partnership is pro or anti-competition.
When will this take effect?
No timetable has been set, but it will take quite some time before the deal clears government approval and the two companies can sort through the significant integration issues involved with combining search and sales infrastructures. 360i’s estimate is that it will be at least Q2 2010 –and more likely the second half of the year – before this partnership takes full effect in the US (and likely 2011 globally).
As such, there are no immediate action items for marketers; and Q4 spending, the most critical time of year for many marketers, should remain unaffected by the deal this year
Should Google be concerned?
Google has a dominant position in search. This deal does not change that. Google should remain well positioned as long as they stay focused on their consumers and advertisers.
What else will advertisers need to know?
Given this breaking story, not all of the facts are on the table yet.
First, it remains to be seen what will happen with Yahoo Search Submit Pro, often known as ‘paid inclusion,’ where advertisers pay a fixed cost-per-click to have their listings included in natural search results.
It is also unclear how this will affect mobile search, a fast growing and rapidly evolving field. Google, Yahoo, and Microsoft have all been promoting and further improving their mobile search offerings, and all have major deals to serve as the default search properties for carriers: Google with Sprint, Yahoo with AT&T and T-Mobile and Microsoft with Verizon. This means three out of four carrier deals could be impacted.
360i will update this POV as more facts become known.