Search experts react to the Yahoo / Microsoft dealSo after one of the worst wrong turns in corporate history, Yahoo has finally acceded to Microsoft by crawling into bed with the Bingmaker. In a nut, Microsoft will power Yahoo’s search engine and Yahoo will sell the ads globally. 

Microsoft’s search market share will rise to around 21.5%, according to figures released by Hitwise last month, or roughly one quarter of Google’s share. 

The deal lasts for 10 years, proving a little about my previous assertion that Microsoft is only five or so years into a 25-year search strategy. It is playing the long game, and this deal has solidified its position.

From where I’m sitting this signals three things:

  1. Yahoo has totally given up on proprietary search. It might become a media company after all.
  2. Microsoft has strengthened its hand and the deal should help prise further market share from Google.
  3. Advertisers may benefit in the long run.

But what do the search marketing professionals make of the deal? I’ve been asking a few questions, so let’s hear what they have to say…

Q1. What does the MS/Yahoo deal mean for the search industry?

Kevin Gibbons, SEOptimise

Personally I think this is great news, there’s so many questions which will need answering such as how will this affect and Bing, Yahoo Search Marketing and Microsoft adCenter etc. But it’s going to be an interesting time for the search industry, especially as we’ve all been so heavily Google focused in recent years. It obviously won’t change overnight, but potentially Google could have a much bigger, consolidated competitor in the near future.”

Andrew Girdwood, bigmouthmedia:

If Yahoo’s paid search ads are powered by Bing then we’ve credible other search engine to consider for paid search budgets. It’ll mean competition and that’ll help keep CPCs down. We may see some instability as bid management platforms adapt to cope with the new Yahoo/Bing landscape. 

“If Bing is only going to supply Yahoo with organic results then it still means Yahoo is out of the search game. They’ll not be developing their search engine, are unlikely to return to it and will in essence become an ad management platform contained in their own ecosystem. For Bing it means that many more users will experience Microsoft’s new search engine and this increases the chances of it reaching a tipping point of usage. Bing can’t always grow through advertising, it needs to be like Google in the early days and grow through word of mouth recommendation. This deal might help that.”

Paul Doleman, iCrossing:

It is a moment of really significant change. With this deal Bing is suddenly going to have a 28% share of the search market which, whilst its small in comparison to Google’s 65%, is a leap in the right direction and might be enough to give Google pause for concern.

“More interestingly, we’re potentially seeing just the first move in a long-term strategy by Microsoft to buy distribution. Yahoo! was the biggest opportunity on the table, but there’s a lot of traffic available through second tier global players like Ask and AOL and more through regional players in areas like China and Eastern Europe. Whether any of this is enough to challenge Google’s dominance is anyone’s guess, but its certainly one of the most important developments we’ve seen for some time.”

Andy Heaps, Latitude:

“The most significant impact will be on the US search market. The deal will create a combined force, which will own 40% of the search market. However, in the UK the impact on market share will be far less significant at 8%, which will barely challenge Google’s current share 89-90%. 

“The timing is unfortunate in a way because, as opposed to a year ago, Microsoft will now be taking over the market share of a declining player. Had this deal been done a year ago the combined market share would have been around 11-12% of the UK search market.

“It’ll almost be most interesting to see the detail of how the deal will tackle the regions outside of the US, UK and France. Microsoft has little coverage outside these areas, so Yahoo! will likely open the door to diversification into these regions, which is where the real damage to Google could be done.

“However, in a way it would have made more sense for Microsoft to partner with or acquire Ask or AOL, since these engines currently have search provided by Google. Taking them over would provide the double whammy of reducing Google’s share while growing Microsoft’s. Maybe this is the next step though.”

Sri Sharma, Net Media Planet:

Google will have to recognise that it is not quite as far ahead as it has been. Also given Microsoft’s recent commitment of 10% of operating income to search investment it could potentially bring the gap between the leader of the pack and the two runners up closer. That could mean Google thinks harder about user experience and results which is good for users: they are the powerhouse innovators in the group, but also about cost to clients, perhaps this will mean that CPCs may not rise as hard as they have.”

Warren Cowan, Greenlight:

Bing and Yahoo combined won’t dent Google’s dominance in Western Europe. A deal may shake up the industry in the US but as for the UK, it would probably have little or no impact at all – at least not in the short term.”

Hedley Aylott, Summit Media:

It means Google will finally have some competition….maybe. Not that it will be major competition initially as Google will still have the vast majority of market share in the UK.  This is a classic case of the proof being in the pudding – as advertisers have been let down by previous, failed, high-profile attempts by Yahoo! And MSN to win back search market share from Google.”

Q2. How and when will it affect advertisers?

Andrew Girdwood:

Advertisers will be able to expect more bang for their buck. If we have two competitive systems we’ll see lower prices and more innovation. It means budgets are less likely to be Google only.”

Warren Cowan:

Advertisers are supposedly all for this deal as it would provide a second strong player in the search market to rival Google and foster competition. The problem is that a Yahoo/Microsoft tie up would create a strong second search player at the expense of potentially having a third strong player in the market. Although this deal may give Google a run for its money, it doesn’t actually foster competition as any third player would be so small that they will be unable to compete with Google and Yahoo/Bing. It would have been better if Yahoo had become a stronger player on its own, but it was never capable of achieving that.”

Kevin Gibbons:

A lot depends on the decisions which are made, if Yahoo! and Bing are integrated, then this is likely to gain a significant market share in most countries. So advertisers will have to consider their organic and paid search strategies more carefully on Microsoft in the future when the two are combined. At the moment I’ve found that many advertisers are not interested in advertising on Yahoo or Microsoft because of the small market share in the UK for each site and the extra effort required to manage two extra paid search accounts. Integrating this would instantly push the UK market share to a higher figure of ~8% and would make the management and setup of a campaign far easier. So adding a second paid search advertising account is something which I would imagine being very likely for a lot of advertisers who are currently using just Google AdWords for PPC.”

Andy Heaps:

As a client we are looking forward to spending more time (and money) with Microsoft since they have excelled at client service over the past 2 years. There will also be a benefit of simplified campaign management for search advertisers since there will only be two interfaces to manage. This will also be a benefit to companies with bid management technology for PPC since they will have fewer APIs to integrate with. Although on the flip side they’ll have to make numerous changes to their interfaces to remove Yahoo! as an individual search channel.”

Paul Doleman:

In the short term its going to enhance ROI on search advertising campaigns. Its going to cut down on campaign overhead by reducing the number of engines to bid across and thus free up marketers to focus on ROI generation.

“Another possibility is that its going to spell the end for some of the free tools that Yahoo offers – things like Site Explorer. There’s no confirmation of this yet but if it does happen that’s going to be a real blow to a lot of people.”

Hedley Aylott:

The impact of this deal will not be evident for some time – 12 months at the earliest. For advertisers it will give them increased reach – which translates into more clicks – but how much is still anyone’s guess. It may also give advertisers more power as one of the world’s greatest monopolies sees its first significant threat in a long time.”

Sri Sharma:

Microsoft would be striving to see the value as soon as possible. While any alignment of MS/Yahoo would take time. I think this could be seen within a year of a deal. The biggest benefit could be better results for users, which means more interest from advertisers to spend.”

Q3. Which sectors will benefit most from the deal?

Kevin Gibbons:

For non-technical sectors such as travel, for example (which appears to be a strong focus for Bing), Yahoo/Bing could become a popular choice as a search engine. It’s also possible that the increase in shared demographic information from Yahoo! Mail and Hotmail (plus other Yahoo/MS owned sites) may help to give Bing an advantage over targeting of content, perhaps for the Yahoo portal and even search results.”

Hedley Aylott:

This is still yet to be seen.  However, it may bean that they more saturated key word markets, like travel, will finally have a viable option to paying premium prices for popular keywords on one platform.”

Paul Doleman:

It is not clear that any particular sector will particularly benefit from this deal, however content areas where Yahoo! has a traditional strength, such as motors and travel, might see some uplift as a result.”

Andy Heaps:

Bing has developed some specialist offerings for the retail and travel sectors which have been a big benefit to them and now this will translate over to Yahoo!.”

Andrew Girdwood:

Google’s still likely to appeal most the SMEs. Their AdWords interface was designed to cope with the self-serve longtail end of the market. Google still has AdSense over and above anything that Yahoo and Bing offer.  Advertisers with the largest budgets may benefit the most; finance, travel and auto.”

Q4. What’s the future for Yahoo now that it has effectively turned its back on proprietary search?

Andy Heaps:

They will now focus on their efforts on developing their display product. However, there is a question mark about how they’ll deliver effective behavioural/re-targeting if they have no visibility of the search queries, as it appears these will be handled by Microsoft.”

Kevin Gibbons:

That’s a very interesting question, if I were to try and predict what’s in store; I would expect Yahoo to continue as a portal and replace MSN (good chance for a powerful 301 redirect from and we all know Microsoft love to rebrand regularly!) with powering all Yahoo searches and adCenter providing paid search ads. I’m sure Microsoft will need to put a bit more thought into this first though!”

Andrew Girdwood:

Yahoo’s still a strong platform. It’s a place to buy advertising space whether that’s display or search. Yahoo essentially becomes a publisher while it continues its battle to come a social networking destination.”

Hedley Aylott:

It needs to reinvent itself and quickly. The latest marketing slogan – ‘Yahoo! Makes Things Brilliant’ – is just too fluffy and vague. It needs to do what Apple did in the computer wars, where there recognised they weren’t going to win, so refocused on a market where they could… and went on to dominate digital music. Unfortunately, Yahoo! doesn’t have a Steve Jobs and all its continuous leadership changes in the US, UK and Europe doesn’t fill one with confidence that it will happen anytime soon.”

Paul Doleman:

One interpretation of this deal is that it shows how far Yahoo! has sunk. Since the abortive merger talks with Microsoft last year, Yahoo! has been on a downwards spiral and some have argued that giving up their search business to Microsoft is simply a recognition that they’s run out of other options. 

“On the other hand, some have seen this deal as potentially a new start for Yahoo! – they’ve recognised that Bing is a good search engine and that coming together with Microsoft in this way is the best chance they have of fighting back against the incumbent.”

Sri Sharma:

The future for Yahoo is display advertising. By letting someone else focus on the search, it will let them concentrate on what has been successful for them.”

Q5. How do you rate Bing’s chances of catching up with Google? How much market share do you think it can gain over the next three years?

Kevin Gibbons:

Catching up with Google? No chance. Becoming a very serious competitor and taking a significant slice of search market share? Very good! If Bing could increase it’s market share in the UK to anywhere near 20%, that would be a significant amount of searches and people would have to take notice and start taking them very seriously.”

Joe Friedlein, Browser Media:

The big challenge that anyone faces trying to unseat Google is to change the behaviour of the masses, which is not going to be easy. Google is so dominant (even to the point of being used as a verb – just ‘google it’) that you will have to offer a very good reason to switch away from it, which I can’t see happening unless the quality of Google results suddenly drops. Google has always done a good job of offering an easy to use search interface and, in general, their results are good. While some of the features on Bing are interesting, it will only really satisfy the geek in us all for a while and then we will probably get bored of it. Features of any search engine will always pale into insignificance when you consider the relevancy of the results (and therefore user satisfaction). 

“Personally, I suspect that the only reason people may change is the fact that Google hatred will grow, but this won’t happen on a mass scale. Take Linux v. Windows – Microsoft has taken a battering in terms of popularity over the years but people still use Windows, even if Linux may be a better platform (not geeky enough to comment on that!).

“I wouldn’t personally place any of my own money on Google suffering very much in the next 2 years unless they do something fundamentally wrong with their search engine, which is highly unlikely as it continues to go from strength to strength.”

Andrew Girdwood:

Bing needs to reach a level of usage where enough people try the search engine themselves and decide for themselves they prefer the results to Google. If Bing can reach that tipping point through this deal, a huge ad campaign and search partnership deals then they can start to take market share off Google. If they reach this tipping point then they could take two or three percentage points of Google each year but its hard to see them getting much beyond the 35% to 40% point at this stage.”

Andy Heaps:

“I think Microsoft have a good product in Bing but they need to support that in the UK with heavy awareness generation like they have in the US. To further consolidate their share they should pursue other partnership opportunities with properties such as Ask and AOL who currently have their search provided by Google.”

Warren Cowan:

Google has massive media ownership. At the moment, unlike Google, not everyone goes to Bing or Yahoo. Bing powering Yahoo doesn’t mean that everyone will use Bing, it just means that those using Yahoo are seeing stuff powered by Bing, but probably won’t even know it’s Bing. What Bing needs is a big property and good distribution with partners. It needs a solid base in both camps and this doesn’t really strengthen its base in either camp. There’s no brand building effort here for Microsoft that’s going to make Bing a leading brand, which is what it needs if it’s going to steal market share from Google. It needs brand power, not just white labelled back door distribution.”

Paul Doleman:

How far Microsoft can cut into Google’s lead is subject to two factors – the success of any distribution partner acquisition strategy and to what extent Bing can improve as a search engine.

“One thing to bear in mind is that traffic isn’t just about short term revenues. You need traffic to refine your results and Bing on its own didn’t have enough to make this work. Bing was already a step change better than Live! Search and is nearly comparable with Google’s results. With the addition of Yahoo!’s traffic Microsoft now has a chance to further improve Bing’s relevancy and so could potentially have an offer that could really challenge Google where it hurts – search effectiveness.”

Hedley Aylott:

This is the proverbial billion dollar question. With so many failed attempts by both MSN and Yahoo! over the last three years, one could surmise they’ve made enough mistakes by now to start getting things right. However, 80%+ market share is a mountainous challenge and MSN will need all the three years to even make a dent. But I wish them all the best as increased competition in the marketplace is good for everyone… even Google.”

So there it is. You can also read what Yahoo CEO Carol Bartz has to say on the agreement, notably: “In short, everything’s just going to get a whole lot better for you.”

Also, Danny Sullivan is doing a great job of live blogging the official press conference, featuring Bartz as well as Steve Ballmer.

So then, what do you make of the deal? A win for Microsoft, no two ways about it, but what lies around the bend for Yahoo? How will it reinvent itself? Leave your comments below…

[Action image by Programmerman via Flickr, various rights reserved]