Microsoft and Yahoo challenge Google
Microsoft finally persuaded Yahoo to surrender control of the Internet’s second most popular search engine and join it in a daunting battle — taking on the overwhelming dominance of Google in the online advertising market.
A 10-year deal announced Wednesday gives Microsoft its best shot yet to show its new search technology, Bing, is as good as or better than Google’s. Microsoft also hopes to use Yahoo to divert sales from Google, which generates more than $20 billion a year from ads.
By spending less on its own search technology, Yahoo expects to boost its annual operating profit by about $500 million — but not until 2012, when the two companies expect to have all the pieces of a complex technological puzzle in place.
“I am very enthusiastic,” Ballmer said in an interview. “This is what I have basically been saying for the past 18 months: The world will be better served for consumers, advertisers and publishers, and there will be more competition for Google, if we can somehow figure out how to get Microsoft and Yahoo together in search.”
Like Yahoo, Microsoft has invested billions in search technology during the past decade. Yet it remained a distant third in market share while its online losses piled up. Microsoft is counting on Bing, unveiled last month, to turn things around. Bing has been getting mostly positive reviews and picking up slightly more traffic with the help of a $100 million marketing campaign. Analysts believe the successful debut pushed Microsoft to reopen negotiations so it could expose its search engine improvements to a wider audience.
While Microsoft and Yahoo await government approval of their partnership, there is no doubt Google will try to increase its lead by upgrading its own search engine, said Danny Sullivan, editor of the online newsletter SearchEngineLand. Already, Google is going after Microsoft’s bread-and-butter business of software for personal computers. It’s working on a free operating system for inexpensive PCs, a move that could threaten Microsoft’s Windows.
The Microsoft deal with Yahoo will allow the both to have about 30% of the world’s total search market share (according to some reports – i.e. ComScore). It still is a far cry from 65% held by Google – but I think that that 30% might just increase. It will also change the dynamics of the search marketplace globally – and also in Asia. With this deal, Google’s dominance is going to be a little less – well – dominant, and threatened.
Source: Yahoo Finance
