MediaVision Blog : Search Engine Marketing

Many brooding theories have emerged after Microsoft bid $31 per share for the legendary search engine and web portal Yahoo! last Friday. This is unsurprising as there are so many factors contributing to the merger. They have called it a “shotgun marriage proposal” and a “Hostile takeover proposal”.

Yahoo! Search of course still commands 20.88% (Hitwise) of the US search market, and handles enormous traffic volumes. That still equates to large turnover, and yet about $63 million dollars less in one year since 2006. Yahoo! employees are being fired, and former Chairman Terry Semel finally left the board, severing himself entirely, to be replaced by Roy Bostock, who along with co-founder Jerry Yang, is charged with the meagre task of handling their approach to the bid.

Google have called up Yahoo! and tried to persuade them into a loyal partnership of sorts - obviously – considering a merger of the internet’s two search industry runner-ups will post their biggest threat since they distinctly took the lead in search and content targeted ads. Now Yahoo! is faced with the choice of being assimilated, torn apart, or to carry on independently wrenching their revenue from the depths of crisis. Microsoft’s offer has since dropped to a reported $29, as it was comprised of a portion of cash and as much in stocks, and investors have responded to Microsoft’s 10% reduction in share price over this week.

So, to get back to those theories I introduced, consider the following:

Google acquires Yahoo!: Can never happen, the FTC would unlikely condone a 90% market share owned by one corporation.

Google outsources services from a still independent Yahoo: Possible, however unlikely. In a conference call hosted by Heather Bellini and litigation attorney Glenn Manshin, Manshin points out that the FTC can in good authority review an agreement between Google and Yahoo, and such an agreement would likely be a greater problem than that of Microsoft’s proposal, due to Google’s significant market share.

Microsoft Acquires Yahoo!: Shareholders each way would benefit from a rise in share prices. The combined search and targeted ad market would prove to be fair competition for Google, if the engineering teams established compatibility and managed to combine and produce progressive development. What would the default homepage for new PCs be? Which instant messaging software would they put their targeted ads on? What would the brand become, which email service would prevail, hotmail? Live? Yahoo! mail? Would Microsoft eventually dominate the package software and online product worlds, and achieve what they’ve been attempting for the past 13 years? Could Microsoft use its massive research & development team and budget to delve into a search platform as simple, clean, straightforward, and as quick and powerful as Google? It looks like a stretch; to pull this off and turn the tables now would show incredible acumen, business savvy, and plenty of good luck. As far as the regulatory powers are concerned, Microsoft can’t be accused of hogging search market share, because of Google’s position, however, instant messaging and email services could be a point of concern.

Time Warner, AT&T or Nokia make an offer: So far there has been tepid interest coming from these directions. It’s as if they’re saying: “If Microsoft wants control of this sinking ship, let them have it, I don’t want to take on the job of resurrecting a lost cause.” An offer now would be surprising. Imagine watching Microsoft go through this stock drop and the strain of admin, only to snatch it up when the share price falls even further. Although it would serve to disable the competition before moving on with your plans, it doesn’t seem likely now though.

Yahoo carries on as per normal: Although they called Microsoft’s offer “unsolicited” and have not given any conclusive feedback regarding their intentions, Yahoo! have given the impression of hesitance in simply giving up a 13 year incorporated company overnight. Yahoo has made history on the internet, having established an at-the-time record of a $475.00 share price during the peak of the dot-com bubble era.

Facebook introduce a search feature and serve ads to their vastly descriptive database of users: An idea presented to me by my superiors here at MediaVision, Louis Venter and Brett Pringle. An alternative that has not been discussed in depth in the media lately, is that Facebook could grab the opportunity that the recent ripple in the industry has created, and monetise their product further than it is already through adding a search feature to make their content and users accessible to targeted ad serving. They do have a very thorough set of user data, so such a move could be very possible. If anyone could present a challenge to Google, would Facebook not be it? I came across a post reporting that Facebook is jacking up its availability on the mobile networks, so not only those with fully web browser-capable phones can gain access, but it will be easily achievable by any wireless mobile hardware, with speed. Maybe they are quietly gearing up towards prominence.

The next few weeks will be very interesting; despite the EU and US regulatory powers standing in the way, probably stifling the progress considerably, the news will and should be closely monitored by all industry observers.