BingHoo – Yahoo gives up on search

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So, it has finally happened.  The will they wont they debate, that has raged throughout search engine marketing world, has come to an end and Microsoft and Yahoo have finally decided to join forces in the battle against Google.  After months of speculation (and numerous articles on The Digital Lookout here, here and here) a deal has been done which will effectively see Yahoo give up on search, and hand their piece of the search marketing pie over to Microsoft.

The 10 year agreement will see Microsoft provide both the natural search results, via Bing, and the paid search results, via Microsoft adcenter, and means that once fully integrated, Yahoo will no longer have a search platform.  The agreement will however, see them retain their search marketing relationship staff as they will become sales force for both paid search solutions.

So whats in it for Yahoo?  Why give up now? 

Well lets face it, they have been on a downward spiral for around 2 years now and their market share has been continually dropping.  Also, as part of the deal, Microsoft has GUARANTEED they will see no drop in revenue per search in any of the countries involved for the first 18 months.  That’s a pretty persuasive offer, no drop in revenues from search, and the opportunity to cut overheads.  Yahoo will be able to remove the large overheads of running their search platforms, and have also confirmed there will be some staff cuts.

The deal also gives Yahoo the opportunity to go back to its routes as a media portal and focus its efforts more on what it does well in this area.  Yahoo Mail, behavioural targeting and news are what got Yahoo to where it is, and with the ability to re-focus on these areas with a guaranteed stable revenue from search it is not a bad option. 

After the initial 18 month period Yahoo will also still be receiving 88% revenue share from the deal, not too shabby!

And What about Microsoft? Why are they giving away so much?

Well this is clearly a simple land grab from Microsoft.  They have wanted a larger piece of the search engine market for a while but have struggled to achieve it.  They have the technology and innovation, Bing is a good product, Microsoft Adcenter too, is a useful tool, but what they haven’t had is the search volume and this was the easiest way to achieve it.

And, in reality, they have paid nothing for the purchase of Yahoo’s share, and more than likely, access to its technology, and they gain a 12% share of revenues.  This deal, once it all goes through will see them controlling approximately 40% of the US search market, and 10% of the UK.  The US figure is obviously the most significant of the two but they will surely be looking to strengthen their hold in the UK also.  That’s not a bad land grab for very little outlay.

Does this make search engine marketing easier?

Debatable.  Certainly only having two major SEO algorithms to deal with makes the process a little simpler, however given the UK market share, most effort goes into Google anyway.  Any success on Yahoo or Bing is generally a nice byproduct of good SEO practice, and not something which is targeted.

For paid search advertisers, only having two interfaces, and two APIs to deal with will make things a little easier, but that depends how they decide to deal with advertising on the two engines.  Do you appear on both by default? is it an opt in opt out for Yahoo? Answers to questions like these will be needed before the exact impact of the change is known.

The deal is set to be finalised early 2010, with a transition expected in the major countries by early 2011, so we have a while to wait.  But this is likely to be the biggest change in search in the coming years, so no doubt the next 16 months are going to be spent speculating about the impact of the deal, and how it is going to affect the market.  As more news comes out about how it is going to work, search marketers are going to have to understand what it means to them and their clients, and what they plan to do to make the most of the change.

More resources on this story:

Latitude Group
Press Release
econsultancy
Bruce Clay
SEOmoz
Search Engine Land