Microsoft-Yahoo tie-up views
Google is the overwhelming leader in a web search and advertising market which the research firm Forrester estimates will grow by 15% a year to more than $30bn in 2014 in the United States alone.
With their partnership announced on Wednesday, software giant Microsoft and internet portal Yahoo are hoping to steal market share – and advertising dollars – from the company that has come to define web search.
Forrester analyst Rebecca Jennings was among those who said the agreement, under which Yahoo will use Microsoft’s new Bing search engine and handle web ad sales, would boost both companies.
“This deal should help convince even the most stubborn budget-holder that spreading their money outside of Google would be beneficial,” she said.
“This will create a more viable second-string player in all markets, giving interactive marketers a significant, credible alternative/additional outlet for their search spend,” Jennings said.
Analyst Rob Enderle of Silicon Valley’s Enderle Group agreed, saying that many advertisers were “nervous” about Google’s dominance and “would just as soon not do business with Google”.
Google enjoys a 65% share of the lucrative search market according to the latest figures from research firm Comscore, followed by Yahoo with 19.6% and Microsoft with 8.4%.
Enderle said a combined Microsoft-Yahoo “gives them enough of a share to be a player”. “At 8% you’re not really a player. You step up to around 30% and suddenly you’re an alternative,” he said.
He said the deal itself “plays to both companies’ strengths”.
“It also eliminates a problem for Yahoo which is ‘How to come up with the massive amount of money in what is now a technology race on search?'” he said. “Because they don’t have it.
“This allows them to focus their resources,” Enderle said.
Chief executive Carol Bartz said the deal will allow Yahoo to “focus on the things we do best – being the centre of people’s lives online with properties like our homepage, mail, finance, news, sports, entertainment, mobile, etc”.
Danny Sullivan, editor-in-chief of SearchEngineLand.com, a website which covers the search industry, said the agreement was a “bargain” for Microsoft, which offered $47.5bn last year in a takeover bid for Yahoo.
He said the deal had an “incredible upside” for the software giant based in Redmond, Washington, but “there’s a lot of questions up in the air for Yahoo”.
“The whole thing has left their whole future very clouded,” Sullivan said.
“Yahoo’s giving up on search and they’re not getting any big payment to do so,” he said. “Just look at what they were promised last year from Microsoft.”
In terms of chipping away against Google’s lead in search, Sullivan said: “I don’t know that this changes anything. This deal doesn’t make Yahoo search any stronger than it was already. It doesn’t make Microsoft stronger than it was.
“For advertisers to really feel that they have made a difference against Google they need the actual number of searches to increase,” he said.
The verdict of the markets was harsh on Wednesday.
Yahoo shares shed 12.08% on Wall Street to close at $15.14 while Microsoft gained 1.41% to finish at $23.80.
Google lost 0.82% to close at $436.24.
Yahoo-Microsoft tie-up – good or bad?
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