Microsoft And Yahoo Make A Deal

James Connell James Connell July 30, 2009 Category Digital Marketing

Microsoft and Yahoo recently announced a deal on search engine marketing. According to the terms of the deal, Microsoft is essentially acquiring Yahoo’s search business. Yahoo’s search advertisers will use Microsoft’s adCenter platform, and searches performed on Yahoo and its properties will serve up results from Bing.

Timeline
This deal will not affect advertisers or searchers for quite some time. The deal first has to gain regulatory approval, which it might fail to do given the denial last year of Yahoo’s proposed deal with Google. If the deal is approved, the issues surrounding such a massive integration likely mean that the deal will not go live before 2010.

Effect On The Market
According to the latest data from Compete, Google dominates the search market with a 73.9% share, compared with 16.6% for Yahoo and 6.5% for Microsoft. That represents an increase of 9.5 percentage points for Google over the past year, and a corresponding fall for Yahoo and Microsoft. It is very possible that this deal will slow or even reverse that trend. Yahoo gets incredible traffic to its various properties, and Bing’s search results have been competitive with Google’s in my testing so far, aside from a few hiccups in its first week. If consumers on Yahoo’s properties learn that searches done from those properties will match or exceed what they would get from Google, then Microsoft/Yahoo could definitely increase share.

What Does This Mean For Advertisers?
Until this deal is approved and put into place, nothing. If it happens, however, it will affect advertisers in a number of ways. First, advertisers will see Microsoft/Yahoo as a more viable alternative to Google, leading more of them to advertise on Microsoft/Yahoo. This extra demand might push up the cost-per-click currently seen on Yahoo & Bing, but probably not by much. Second, Microsoft’s adCenter offers better fine-tuning of PPC campaigns than Yahoo Panama, so search engine marketing experts will be able to create more effective campaigns than those currently appearing on Yahoo.
The most important effect, however, depends on how Bing evolves. As I noted in my last blog, Bing has effectively reduced available impressions by serving limited numbers of ads to searchers who tend not to click on them. This has reduced traffic for some of our clients, and we know that other SEM companies have seen this trend, too. If Microsoft doesn’t change Bing before the deal goes into effect, this impression reduction would change from an annoyance into a major problem. Path Interactive will continue to consult with Microsoft in order to prevent this from happening.

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