Microsoft n Yahoo
Backers panned Yahoo’s search and advertising deal with Microsoft on Wed. , sending Yahoo’s stock down 12 p.c. IDC’s researchers called it a “strategic mistake. But here’s what’s good about it : After a year and a twelve public ditching, behind-the-scenes drama, and dysfunctional communications thru leaks to the press, Microsoft and Yahoo now can get back to business. The Microhoo idea has been reduced from a giant cloud of doubt hanging over both corporations to simply a sophisticated partnering between 2 rivals with Google as a common enemy.
The range of chances for Microsoft and Yahoo, which ran all of the way from zilch to Yahoo vanishing altogether, has been pruned back to a far more controllable scope. No-one will spot any difference right away from the outside.
First comes regulatory inspection, with the corporations desiring approval in early 2010. But already, the deal offers a framework that should make it simpler for the corporations to create their new identities. With Microsoft taking license to Yahoo’s search technology, applying its search-ad auction process to both companies’ searches, and offering roles to several Yahoo staff, it would seem Redmond is carrying more of the PhD.-intensive fight to Google. Yahoo, keeping its display advertising business and concentrating on its index page revamp, becomes more of a center for people’s online activity and platform for outside Web sites’ developers.
One is the work Yahoo has done to enlarge search results thru a program called SearchMonkey, which can translate tags on others’ internet sites so they can be polished up with new info when those pages appear in search results. To work, it needs the co-operation of the Web crawlers that index the contents of net pages and the servers that present the search results. To me, that looks like the kind of chore which will require Microsoft and Yahoo to work together in search. Luckily, Microsoft and Yahoo have a 100-page playbook that had better address such aspects, and Microsoft Senior vice chairman Yusuf Mehdi announced Wed. he is keen on the SearchMonkey approach.
The corporations also gave themselves 2 full years to entirely implement the deal, too, so there’s time to work out such details. In the meantime , Yahoo can’t afford to stand still. SearchMonkey is one component of a new cross-breed search page that Yahoo claimed it will start testing with its users beginning in Aug.
There’s some crucial context for these changes and for the Microsoft-Yahoo deal : search results are growing outside the plain list of 10 hyperlinks with accompanying pieces of text. Google, for instance, mixes in ever bigger quantities of “universal” search results like maps, YouTube videos, photographs, and reports. Yahoo’s new search results page include not only SearchMonkey, but also display advertising and the key element of its new default page, a customizable list of applications down the left side. The search results themselves become just part of a wider package, so Yahoo outsourcing the particular search engine needs to Microsoft isn’t giving away the maximum amount of the core business.
The partnership means Yahoo will get only 88 p.c of search-ad income on its sites for the 1st 5 years, down from 100 % today. Yahoo, though , also gets lower operational costs and so, it expects, larger profitability over the long run. Carol Bartz, Yahoo’s new Chief , has shown herself to be a pragmatist who favors picking her battles.
With the Microsoft deal, she’s selected to sit an enormous one out, freeing the company from needing to out-Google Google. What the company sacrifices in aspiration it is getting back in goals that are essentially attainable. For Microsoft, though , the battle against Google becomes more intense.
The mixed search market share of Yahoo and Microsoft still is half what Google has, and the incontrovertible fact that Wednesday’s Yahoo deal is smaller in scope than some earlier possible incarnations means Microsoft has that much more hard work before it.
The company clearly wants to make a third big business out of its online operations to complement its Windows and Office cash cows. Getting Yahoo’s search technology and Web site traffic gives it a better stronghold but by no means a victory.