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.<\/p>\n
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.<\/p>\n
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.<\/p>\n
“This deal should help convince even the most stubborn budget-holder that spreading their money outside of Google would be beneficial,” she said.<\/p>\n
“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.<\/p>\n
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”.<\/p>\n
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%.<\/p>\n
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.<\/p>\n
He said the deal itself “plays to both companies’ strengths”.<\/p>\n
“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.<\/p>\n
“This allows them to focus their resources,” Enderle said.<\/p>\n
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”.<\/p>\n
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.<\/p>\n
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”.<\/p>\n
“The whole thing has left their whole future very clouded,” Sullivan said.<\/p>\n
“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.”<\/p>\n
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.<\/p>\n
“For advertisers to really feel that they have made a difference against Google they need the actual number of searches to increase,” he said.<\/p>\n
The verdict of the markets was harsh on Wednesday.<\/p>\n
Yahoo shares shed 12.08% on Wall Street to close at $15.14 while Microsoft gained 1.41% to finish at $23.80.<\/p>\n
Google lost 0.82% to close at $436.24.<\/p>\n