MediaVision Blog : Search Engine Marketing

Speculating on the future implications of the Yahoo!/Microsoft merger is like sticking your head on a blog, I mean, block. There’s search, there’s ad networks, IM, mobile networking, shares, social media, histories, politics and regulations – too many to cover in one post.

But to follow is an excerpt from Microsoft’s employee webcast on the 1st Feb, where a bunch of big wigs sat together and tried to calm the waters beneath a hurricane. If you look closely at what Kevin Johnson (Microsoft’s chief financial analyst) had to say, you can use his couched words to understand the status quo.

He says, “By combining (Yahoo! with Microsoft), we can have one team of people across the two companies working on the search index, and then have others continue to focus on areas where we’ve defined differentiation in search.”

Just to backtrack, let’s remember that Yahoo! once powered Microsoft, Google once powered Yahoo! and by 2005, all them were out on their own competing for market share. Needless to say, Google won that round. Concerning the “search index”, you could say that Yahoo! Search is ahead of Microsoft, whose weirdly divided Live Search and MSN Search is derisively seen as a spammer’s paradise. Yahoo! could go back to powering MSN Search, as they used to do when they were properly competing in the world market, instead of hiding in their stronghold somewhere in the Japanese mountains. How can advertisers and small companies resist a combined search marketing division that is daddy Google’s best rival? Consequently, how can the two not bring paid advertising to the party? By “defined differentiation” you could say that Microsoft has its eyes on Yahoo!’s contextual advertising program, which may, you know, one day, possibly, compete with Adsense.

Next Johnson says, “We’ve got so many ideas, more engineers applied to those ideas will drive breakthroughs in search. This is about expanding our engineering capability.”

You could say that it’s difficult to exceed limitations if you begin on a model of replication. By this I mean that these two companies are big ones. They are established, and they exemplify their brands. They’re competing directly with Google, which is a search company, not a software company. Where is Web 2.0 interactivity and mobile search here? Meshing services across the Internet doesn’t give us better stuff to use, does it? How can two big companies expect to carve new pathways if they’re moving forward on the basis of an uncomfortable acquisition, and where their race-leader (Google) is not actually in the same race? Do they join in? Do they smother Yahoo!’s best services, like Flickr, Del.icio.us and MyBlogLog, which are arguably floundering anyway, and try something new?

“Now, certainly, you look and say, well, we also understand it’s about operational efficiency. Yes, it is. There are duplicate costs across Yahoo and Microsoft (both developed ad platforms, both developed search engines). It also means looking at every discipline and ensuring, number one, that we have the right people in the right jobs…”

There is high potential for brand confusion and culture clash between Yahoo! and Microsoft. On the one hand, you could say that the pieces of Yahoo! (Yahoo! Finance sold to News Corporation, for instance) could be more useful sold individually. Also, as it’s a merger rather than a business deal, Microsoft has to pass US and EU regulatory gatekeepers. As they’re already on a kind of tech-world probation for bad behaviour (with Netscape and anti-trust), Google is gleefully calling the kettle black. On the other hand, Microsoft is a unified, institutional, business machine, while Yahoo! is a very big, impressively R&D-focussed company. Microsoft will be gaining with the acquisition of Yahoo! Search, but what parts of the mother ship will Microsoft keep, and what will they scrap?

“…and (ensuring that), number two, the right amount of resources (are) allocated to that particular function. Again, that will be handled in a very thoughtful process. “

So… which team wins the battle for supremacy? On which hand do they stack their chips? Remember, this is assuming that Google doesn’t get in the way and “offer” its services to Yahoo! to help a brother out, you know. From the search quarter we’re watching this battle begin, thinking that having two places to gauge our rankings is great. Simplifying PPC from three down to two spots is even better. The implications of the merger (which may be a long time coming) reach far and wide. But they don’t actually compromise the prospects of search, other than to take up our time speculating and conjecturing on a future that will probably make way for improvement. Will predator Microsoft make the kill? You could say that they might. Just shut up and watch.