There are two things that make a search engine successful: quantity of traffic and the quantity of advertisers competing for the top spots and pushing up CPC’s. Currently, there is a great deal of industry speculation, which claims that, if Microsoft and Yahoo’s deal goes ahead, it could create a true competitor to Google in the search and advertising market. But is this really the case?

Yes, their traffic will be added together, but will they see higher CPCs through attracting more advertisers?

There’s a general assumption in the industry that there are fewer advertisers on Yahoo and Microsoft than there are on Google, but I recently heard that as many as 96% of the top 200 advertisers are running their campaigns across all three of the search engines. 

I’ve had a quick look into this myself, using the key and long-tail terms ‘flights New York’, ‘trains to Leeds’ and ‘cheap trainers’, and found that each search engine had the following number of advertisers:

‘flights new york’
Microsoft Bing: 50 advertisers
Yahoo: 28 advertisers
Google: 48 advertisers

‘trains to Leeds’

Microsoft Bing: 4 advertisers
Yahoo: 5 advertisers
Google: 5 advertisers

‘cheap trainers’
Microsoft Bing: 29 advertisers
Yahoo: 27 advertisers
Google: 28 advertisers

Admittedly this is a small sample, but it does show that those advertisers who are bidding on the relevant search terms are already running their campaigns to ensure they are represented in the paid search listings across Microsoft, Yahoo and Google.

So why is this significant?

Well, for search engines to make money, they need to attract large volumes of advertisers so they can drive high CPCs. Therefore, the idea behind Microsoft and Yahoo’s partnership is that together they will not only deliver more traffic but attract more advertisers and therefore make more money through higher CPCs. 

If those search marketers advertising on Google are already covering the relevant search terms on Microsoft and Yahoo, then it seems unlikely that Microsoft will inherit additional advertisers as a result of the merger.

Ultimately, this deal is looking promising for search advertisers – very little change to their campaigns and yet they’ll be saving time by targeting the traffic of Bing and Yahoo in one interface, which will be welcomed by most in the current economic climate.

Unfortunately, the immediate benefits for Microsoft and Yahoo are less clear. Hopefully for them, the hundreds of millions of dollars they are spending on advertising their search engines will be enough to lure away loyal Google users. This still seems to be the real battle that needs to be won.

Yet, in the meantime, it looks to me like 1+1 really does just equal 2.