Another strange deal for Microsoft in their never-ending quest to challenge Google in online search.
Yahoo.com and Bing.com will maintain their own branding but search results on Yahoo.com will say “powered by Bing.” Yahoo, in turn, will be responsible for attracting premium advertisers.
In other words, Yahoo! sheds their expensive search engine technology and Microsoft pays Yahoo! for the privilege.
Microsoft will pay Yahoo 88% of the revenue it gains from searches on Yahoo’s sites. Microsoft will also have the rights to integrate Yahoo’s search technology into its own existing Web search platforms.
What impact will the deal have on the search engine market?
In a joint statement, the companies said that “advertisers no longer have to rely on one company that dominates more than 70% of all search.”
Uh huh. Let’s look at the scene two years from now to see what market share gains Microsoft makes, if any. Bing hasn’t made a dent in Google’s share, so Microsoft is desperate. Microsoft CEO Steve Ballmer says the deal will impel Google to launch an antitrust complaint.
We’ll likely face issues from the competitor who may not like the competition. But our argument is we’ll provide more competition, not less.
Microsoft may be more competitive because it has eliminated a major competitor in search, but how does that translate to “more competition, not less?”
I like Bing. I use Yahoo! as my browser’s default home page. Yahoo! should stick to what it does best—news aggregation. Ballmer again:
Consumers will get better products, and it will help the industry as a whole to prosper through our shared vision and shared values.
Microsoft is a company with no vision and corrupt values. What does that say about Yahoo! The deal is about money. It costs Yahoo! a lot of money to run a search engine. With Microsoft at the helm, Yahoo! can devote resources to sales and new products. Revenue may drop for awhile since Microsoft gets to keep search engine results revenue, but Yahoo! has shed a few hundred million in annual costs.
Microsoft said the transition will cost the company “several hundreds of millions of dollars,” but it will benefit in the long run from the ability to charge advertisers more for its service, because the deal will improve the relevance of search results.
That remains to be seen. The deal is not about vision or competition. It’s about math.
Yahoo said the agreement will modestly decrease its overall revenue but increase its operating income by about $500 million annually.
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