Still Searching for a Microhoo Proponent

By Clint Boulton  |  Posted 2009-07-30 Print this article Print


"We face a formidable competitor in one aspect, and that aspect is search," Bartz said. "It became obvious to us that working with another great technology company would help us share the investment expense to scale the market. This deal enables us to keep a healthy revenue stream and invest in areas critical to our future, while Microsoft invests in search technology. We want to invest in what is really important to our future success, including winning audience properties, display advertising and mobile experiences."

Search Engine Land's Danny Sullivan told eWEEK after the Microhoo call: "It effectively takes Yahoo out of the game, as far as I'm concerned. They're no longer a wildcard to distract consumers or advertisers."

Sullivan, who wrote a search eulogy for Yahoo, is among the majority. Take a look at these stories from the media and blogosphere:

How does a company like Yahoo win audience properties, and bolster its display ad share and mobile search experience without a Yahoo core search offering? This remains to be seen.  

Remember when you were challenged to find someone who doesn't believe Yahoo fell on the sword with this agreement? eWEEK believes it has found two analysts who see the deal a bit differently from others-IDC analysts Karsten Weide and Susan Feldman, who wrote a research note July 19.

They like that Yahoo will keep the majority of its search ad revenue, while saving millions of dollars on data centers, servers, storage and telecommunications costs.

They like the fact that adding Bing's search traffic market share will increase its market share to a combined share of 28 percent, making it a mildly more attractive offer to advertising clients. Finally, Weide and Feldman said the deal will allow Yahoo to focus on what it is good at: media and advertising.

"More focus on sales and a more attractive search ad offer could increase the combined revenue, thereby improving both companies' top line and making them more competitive," Weide and Feldman said. But wait, in the conclusion of the research report, the analysts said this deal is strategically unwise for Yahoo.

"Search will remain the most important online advertising segment for years to come. If that is so, why outsource search development to someone else without any control over that someone else's work? Why, in one word, put one's fate in somebody else's hands? Because there is no way back from this deal: Once search is outsourced, it will be almost impossible to bring it back in-house. Should Microsoft lose the race against Google in terms of search relevance and ad placement technology, Yahoo's ship would sink with Microsoft's."

OK, so maybe it really is impossible to find people who think this deal is good for Yahoo. Well, eWEEK's phoning paid off.

Forrester Research's Nate Elliot pointed out that search is one of the few places Yahoo hasn't been successful. So, he argues, why not let Microsoft Bing take control? Elliot explained:

"I don't think this is Yahoo giving up on search. I think it's them finding the easiest way to make money from search. They've been putting a lot of effort into this for a long time. They spent a lot of money, a lot of resources trying to challenge Google and it wasn't working for them. If they can spend a lot fewer resources and still make money from search, that's a win for them. For me, it's a very smart move, to say: 'We want to find a low impact, low resource way to monetize our search traffic and we want to spend our resources focusing on the things that we're best at."

Elliot is in the minority, but you have to admire his logic and contrarian stance. What do you think? Has Yahoo begun its suicide march?  


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