Technology analysts have started to raise questions about the impact of the deal cut between Microsoft and Yahoo on the ability of the companies to compete against the dominance of Google in the internet ad space market.
“How will Yahoo sell its search deal to affiliates currently powered by Yahoo’s search engine once the deal is done?” asks Gartner VP and lead analyst on Yahoo Allen Weiner.
David Mitchell, Research Fellow at Ovum, has issues over the engineering effort the coalition might signal. “There are significant engineering challenges that both companies will need to work through and a substantial change management task to accomplish in implementing the agreement and the vision that it encapsulates.”
The two companies yesterday announced a 10-year internet search partnership that will see Yahoo power its sites with the new Microsoft Bing search-engine technology and Microsoft integrate aspects of Yahoo’s search software into its own web search platforms. Microsoft will not be paying anything upfront, and has offered only to pay traffic acquisition costs to Yahoo.
Mitchell sees the deal playing to the relative strengths of each of the partners, but has concerns the execution could draw attention away from the task of developing and selling products, and risking revenues.
“Microsoft will be the technology provider, drawing on its considerable expertise and investment capability for search R&D. Yahoo’s, by contrast, focuses on advertising and media – playing to its core and historic strengths.” The implementation of this deal will not be without its challenges, he added.
Gartner sees the move as continuing the positive momentum generated in recent quarters by Microsoft in the search sector.
As CBR has reported earlier, it is easy to see why Microsoft has had to start pushing its search strategy. Nielsen Online put Google’s share of the US search market at 57% in January 2008, rising to 63% in December of that year. Microsoft, by way of contrast, began at 12% and slid to just under 10% by the end of 2008.
The arrival in June of the new Microsoft Bing engine, together with the acquisition last year of Norwegian enterprise search firm Fast Search and Transfer (FAST) are moves intended to address its market deficiencies, and redoubling efforts with Yahoo could help it readdress the balance in the market.
Gartner notes that Yahoo! too has put a significant amount of time and energy into its search strategy, namely with the BOSS and Search monkey efforts.
There are issues that surface here though, said Weiner. “According to Microsoft, that platform will fall under its umbrella which leaves developers and publishers to question the future of both efforts as well as their desire to work with Microsoft.”
