MediaVision Blog : Search Engine Marketing

Think of contemptuous boy-children fighting in the schoolyard. The biggest, most feared bully in the class, Microsoft, has been yanking up the undershorts of the other kids for some time, and has inspired some retaliation, in the form of a gang-up.

Microsoft stands to gain a lot by sponging up Yahoo! into its online makeup. They want the search and social media power that Yahoo! have built, and can offer an incommensurate wad of their cash, stock value and the power of its application development. They have the home PC software market, but they want it all; they want the online market as well, they want to be the biggest, toughest kid in the classroom and on the playground. Yahoo! have stood their ground up until now.

Perhaps Yahoo! don’t share the same hungry desire for absolute power. They are banding together with Time Warner-owned AOL, formerly America Online, to combine their facets in an attempt to stay off the class bully. Microsoft are willing to go as far as to oust Yahoo!’s board of directors and appeal to Yahoo!’s shareholders directly with a promise of those parties’ share prices rising in value as a result of a clean buyout. – In other words, they want to go to teacher and “tell on”.

The reason Yahoo! have begun this AOL “merger” is because their financial advisers. The investment banker firms, Goldman Sachs and Lehman Brothers, have mulled over a list of parties that would enhance their share value from some kind of partnership, and chosen AOL. AOL have of late bought a number of online companies, including a contextual advertising company and a behavioural ad company, to comprise their “Platform-A” business group. Their search has not been given any significant focus since early 2007, when they abandoned their FullView architecture, which made their search platform unique. This happened shortly after search executive Jerry Campbell was poached by Reuters. So the two companies would have less overlap of services than a combined Microsoft-Yahoo! entity.

Google have also agreed to outsource AdSense ads into Yahoo!’s search results temporarily (I have yet to come across the details of the agreement, but I do know that it is on a trial basis). The obvious implication here is that Google wants to aid the avoidance of Microsoft’s buyout, and will by helping Yahoo! monetise their search results, which they are already incredibly good at; 70% more so than Yahoo!, to be precise. Also, Google owns 5% of AOL and has the right to force it to go public or sell that 5% back to Time Warner at a reasonable market price by later this year. So, Danny Sullivan points out that Google possesses the power to ask less from Time Warner to perhaps inadvertently help facilitate the merger.

The whole thing begins to make sense after reading Danny’s post in February, where he sketches where each company has strength and how that effects long-term executive decisions. He points out that Yahoo! have no apps, for example, an equivalent to Microsoft Office or Google Docs, leaving a point for improvement there. They have recently announced that they will release a free analytics service, based on the product IndexTools, which is their software that rivals competing tools such as Omniture. This move is to persuade more of the market share into their search world, by simply offering something that worked well for Google and Microsoft. Yahoo! will scrounge for any value at this point to stop Microsoft touting shareholder opinion to their side.

I will not challenge any of Danny’s notions, as he seems to have pushed plenty of his own insight and research into his post. I will just reiterate that the big kids are playing a rough game of tug-of-war, and the near-future outcome is up to whoever adds the most supporting tuggers to their side.