Microsoft-Yahoo search deal: 3 reasons why it makes sense

A mega-push to take on rival Google
  • (Computerworld)
  • — 30 July, 2009 08:13

The Microsoft Corp. and Yahoo Inc. courtship that has been taking place on and off for the past four years had grown as tiresome as the annual Brett Favre retirement watch.

But unlike the All-Pro quarterback, who finally decided Tuesday to remain retired from football for good, Microsoft and Yahoo apparently decided that day to do the opposite, and finally come to a belated embrace in order to take on their common foe, Google Inc.

While the deal will no doubt face extra scrutiny -- and criticism -- from jaded observers, it also appears to be a winning one. Why?

1. It's no Heaven's Gate (or Waterworld)

Heaven's Gate was the late-1970s Hollywood epic that clocked in at five-and-a-half hours and cost a then-unheard-of $US30 million to film. It was the standard for bloated box office bombs, until Kevin Costner's Waterworld drowned in 1995.

Similarly, the Microsoft-Yahoo merger that almost took place in spring 2008 for $US44.6 billion would have set the modern standard for overpriced acquisitions, becoming the symbol of the end of the Web 2.0 era, just as the $US165 billion AOL-Time Warner merger came to symbolize the end of the dot-com era and its excesses.

A search partnership with Microsoft's up-and-coming Bing search engine becoming the default engine for Yahoo will, far from leading to overspending, likely help Yahoo save hundreds of millions of dollars in R&D investment, and potentially help both vendors reap more advertising dollars by combining forces to create the scale that Madison Avenue apparently craves.

According to a report late Tuesday by AllThingsD, Yahoo would sell search advertising for its sites and some of Microsoft's, while Bing would power it. Yahoo would keep 110 per cent of the revenue in the first two years, and would receive 90 per cent in the third year.

That will generate billions of dollars for Yahoo, according to AllThingsD, citing anonymous sources, enable Microsoft to become the clear No. 2 in search behind Google.

2. There's no cannibalization

As much as Microsoft and Yahoo differ in the general public's eye, a merger between the two companies would have resulted in a massive overlap of workers and products, and billions of dollars of cannibalized revenue. A smaller deal results in less risk of potential downsides.

Since Bing's launch on June 1 as a replacement for Microsoft's Live Search, its market share has risen from 5.5 per cent to a high of 15.6 per cent and then continued to rise and fall. But those have pretty much paralleled rises and falls in Google's usage, according to figures published by StatCounter.

In other words, Bing appears to be stealing users away from Google, not Yahoo, whose market share has remained fairly steady at about 11 per cent.

Combining forces will give the two search portals a total share of almost 20 per cent, based on Monday's figures from StatCounter, with minimal cannibalization.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Eric Lai

Computerworld
Topics: Microsoft-Yahoo search deal, Yahoo, Microsoft
Comments are now closed.

Latest News Articles

Most Popular Articles

Follow Us

GGG Evaluation Team

Kathy Cassidy

STYLISTIC Q702

First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.

Anthony Grifoni

STYLISTIC Q572

For work use, Microsoft Word and Excel programs pre-installed on the device are adequate for preparing short documents.

Steph Mundell

LIFEBOOK UH574

The Fujitsu LifeBook UH574 allowed for great mobility without being obnoxiously heavy or clunky. Its twelve hours of battery life did not disappoint.

Andrew Mitsi

STYLISTIC Q702

The screen was particularly good. It is bright and visible from most angles, however heat is an issue, particularly around the Windows button on the front, and on the back where the battery housing is located.

Simon Harriott

STYLISTIC Q702

My first impression after unboxing the Q702 is that it is a nice looking unit. Styling is somewhat minimalist but very effective. The tablet part, once detached, has a nice weight, and no buttons or switches are located in awkward or intrusive positions.

Resources

Best Deals on GoodGearGuide

Compare & Save

Deals powered by WhistleOut
WhistleOut

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?