The deal is an interesting one that has been in test since Bing launched: Microsoft powers quality search, Yahoo sells high-ROI ads.
The most emphatic reaction to the deal comes from Jason Calacanis, Yahoo committed seppuku today. He shares the opinion that if Microsoft wants shares of the search market so bad, then Yahoo! shouldn’t let go of their precious shares.
If search is the black gold of the Internet, it doesn’t mean that everybody should start digging for rocks. The obvious truth about Yahoo is that they boomed in the search space as first-movers, but they never managed to compete with Google’s vision. Stepping off the search market before it’s too late is a very difficult and mature move for a big company.
Yahoo couldn’t pick a better time to join Microsoft’s forces: The Redmond’s troupes are coming hard on Google these days with the heavily-advertised whatever-you-want-to-call-it Bing engine:
- Live Search was never picking up despite nice feature additions. Microsoft needed a brand new approach.
- Started an acquisition strategy to integrate a new development culture (ie to unloose the belt).
- Launched Bing: $100 million marketing budget to get back at Google.
- Bing creates strategic partnership with Yahoo to increase search queries.
Do we think we will have better algorithms for relevance? Yes we do. There is a feedback loop in search. the more searches you serve, the more you learn about what people click on. Scale drives knowledge. There is a return to scale from seeing that much activity [that is more] than Yahoo or MSFT see independently (Erick Schonfeld quoting Steve Ballmer in Techcrunch)
- Microsoft becomes smarter faster.
- volume = intelligence = intuition = accuracy = competitivity
- Microsoft launches new developer platform for Windows Mobile to start competing against
- Windows follows Android’s model, becomes powerful mobile/Web platform, stays in the competition against Google for Enterprise clients of their platform.
So ok, but quid of Yahoo! in this race?
It wouldn’t make sense for the company to shrink its activities down to just selling ads. Today’s deal momentum is an opportunity for Yahoo to piggy-back on Microsoft determination to catch up on Google. Google’s dominance mostly comes from a selection of sticky products that keeps users contiguous to the brand. Microsoft is not scoring so well in terms of social networking in general. Yahoo! has a few powerful assets in this category: Flickr, Delicious, Yahoo! Mail… It also attracts developers and ‘develosumers‘ with products such as Yahoo Pipes and promising protocol YQL.
Yahoo! is still an attractive place for consumers and developers. With search out of its roadmap, Yahoo! can now focus on developing a more competitive suite of products that may lead them one day to a full enterprise-class integrated solution… With Bing as its search component.