What does the Microsoft and Yahoo deal mean?

Personally, I think it means they’re positioning themselves to be able to do battle against Google effectively. Even Microsoft was quoted around the release of Bing as saying they weren’t competing against Google, but rather trying to steal the #2 spot from Yahoo. Neither was in a great spot to try and carve out market against Google before, but together they stand a better chance.

In business terms, this should make it easier for them to build a better search engine collaboratively, by sharing parts of their search and database algorithms and using the best of each. It also streamlines advertising revenue now that it’s a revenue stream that will need to be combined (at least in part). It could be taken as Yahoo caving to Bing on the search engine front, but more likely I think that they’ve just decided to focus on other markets.

Finally, in consumer terms, it may be a signal that more collaboration is on the way. Think Live Messenger + Yahoo IM (sort of like AIM+ICQ awhile back). Think Hotmail + Yahoo mail (where tools on one side can see users on the other). Any web apps that are unique to Yahoo may make their way over to Windows Live as well.

@dUc0N Thanks! Would you happen to know the specific terms, like who’s getting what?

Failure + Failure = This

You can listen to the announcement here.

edit :: that requires some bullshit registration.

@johnpowell Thanks John. I’m just having trouble parsing through the business talk. Do you happen to know what it means in layman’s terms? What does it spell for Google?

More mediocrity for tragic cubicle dwelling hacks.

It’s certainly a concentration of the industry. Between the two of them, they will have something like 80% of the advertising business. That might increase competition, or it might decrease competition. Google already has so much market power, that they could act (and maybe are acting) as a monopoly. So the merger could provide a competitor with the market clout necessary to compete seriously against Google.

On the other hand, with fifty percent of the market, Google could set the markets, and will only start losing if someone comes out with a seriously better product, that takes a new approach to what we need, and that grows, like Google did—and Microsoft before them.

Even huge companies don’t always identify the next big advance and snap it up before it gets really huge. Huge companies always seem to get stuck in their ways after a decade or two, and then they don’t innovate as well, and they aren’t nearly as efficient as they were. It’s hard to keep your hand on the pulse of the consumer. You hit a home run, and you tend to get complacent, and the world passes you by, and suddenly you find yourself in bankruptcy.

We can only hope that the Microsoft/Yahoo merger works to keep Google more honest. On the other hand, I, personally, have an animosity towards both Microsoft and Yahoo, because they used to have great products, and then they took over, and screwed us over in various ways. I hated that Microsoft essentially killed WordPerfect. I hated it when Yahoo just got too advertizy.

Google has kept its interface simple and unobstructed. They’ve added useful, sensible features. They have not (yet) gone completely into crass consumerism with obtrusive advertising. They may fall, at some time, but for the moment, I still have a warm fuzzy for them.

@jhbao: Sure.. you can read the full press release here.

The terms boil down to this, for the duration of the 10-year contract:
– Microsoft gets to use Yahoo’s search engine code freely
– Yahoo will rely exclusively on Bing search for all its sites
– Search ads will be handled and sold exclusively by Yahoo, with the exception of “self-serve” ad purchases, which will be handled by Microsoft
– Display (i.e. banner and flash) ads will continue to be handled seperately
– Microsoft will be paying Yahoo for the boost in traffic they’re getting
– Microsoft guarantees that Yahoo will get at least a certain amount of ad revenue per search

There’s also a section mentioning that, “the agreement does not cover each company’s web properties and products, email, instant messaging, display advertising, or any other aspect of the companies’ businesses. In those areas, the companies will continue to compete vigorously.” It’s true, there is still going to be competition there. However, I believe that my original analysis is true, in that this agreement makes it easier to combine these services in the future, by setting a precedent for cooperation between the two.

I don’t think it will make much difference to the average user. Most likely, the advertisers will have a different place to pay their bills, and the revenue will be split up differently than it has been.

My cousin says it’s sort of like you own a camera store and you contract with the maker of memory sticks to let him sell them in your store for part of the profits.

@YARNLADY – Well, sure… nothing to base your life plan around… but it may be a sign of more to come, the same way as how the camera shop owner might test the water by offering X brand memory sticks, and then move on later to include X brand batteries, because the memory sold well.

It means you will now pay for everything.

@Blondesjon – Only if they both want to fall flat on their faces. There are plenty of other decent search engines (besides Google, such as Wolfram Alpha) that will happily step up and fill the void as users look for an alternative.

Besides, that’s not a web or computer company trick… charging for everything on the most minute possible scale is a telecom company trick.

Got an update! Mike Masnick, who runs the fantastic Techdirt weblog wrote up an op-ed for Forbes detailing why this deal may be misguided on both companies’ parts. Definitely worth a read!

@dUc0N Thank you for the updates, great links.