With details of the deal between Microsoft and Yahoo now well and truly publicised (I even saw a piece in The Sun where a page 3 model was discussing what she liked about Bing), it is time to take a look at exactly what this means for the future of UK search, Yahoo and Bing.
29th July 2009 saw confirmation of a deal between Microsoft and Yahoo that will result in Microsoft taking ownership of Yahoo’s search activities for the next 10 years. Unlike past attempts to strike a deal with Yahoo from Microsoft and Google, this deal will see no upfront payments to Yahoo in favour of a revenue share model, instead Yahoo will receive 88% of the revenue from ad sales from its own sites for the first 5 years. Although still vulnerable to government regulators (a fate that ended the previous attempt at a Google / Yahoo partnership) the deal looks likely to stick and will have an impact across both businesses and search as a whole.
What’s in it for Yahoo?
Well, on top of the 88% revenue from ad sales on Yahoo properties, Yahoo will also benefit from not having to spend a penny (cent) on developing its own search technology. Initial figures being suggested are an income of $500 million per year and a $200 million per year saving in costs. Moving forward Yahoo will focus on the sale of billboard style advertising (banners, skyscrapers etc.) on the Web as well as developing its search properties to build upon the 550 million or so people that visit them each month.
What’s in it for Microsoft?
Well, firstly it does seem that Microsoft have the sweet end of the stick but they also have the responsibility and risk. By 2012 (or earlier) search across all Yahoo properties will go through Bing, in effect doubling market share in the UK from 4% to 8% and more than trebling market share in the US from 8% to 28%. While this may not seem like a major event given that Google has nearly 90% market share in UK search and 65% in the US, it does create a definitive rival, as it will allow Microsoft to focus their efforts without having to worry about Yahoo.
Paid search will run through Microsoft adCentre although it will no doubt be a huge operation to migrate Yahoo campaigns across.
What’s in it for UK Search?
If we look beyond UK search for a second in favour of the more impressive US figures, it can be seen that Bing is about to become a big player in search. 28% in the US market is a huge foothold from which to further chip away at Google and with the acquisition of the Yahoo search team, Microsoft have a plethora of resource, data and ideas available to further enhance Bing. Future enhancement of Bing combined with the release of Windows 7 (probably with Bing as the default search provider) and the huge marketing budget in excess of $100 million solely aimed at promoting Bing, will no doubt play in Microsoft’s favour putting the ball squarely in their hands. If they make a successful play and truly innovate as they promise, then a rise in market share in the US and the UK is on the cards. If however they fumble, which nobody outside of Google would like to see, then we all know who will be there to pick up the pieces.
For now, nothing changes, but by 2012 Microsoft will achieve a level of exposure in both UK and US search that can’t be ignored, even by people who currently consider Bing, adCentre and Yahoo just not worth the effort.
From competition comes innovation and the coming years in search should be very exciting indeed.