Microsoft Downplays Yahoo Upgrades to E-Mail, Search, Messenger Apps

Microsoft responds to Yahoo's Aug. 24 announcement of upgrades for users by insisting that it had already integrated many of Yahoo's new features, including search results from social networking sites such as Facebook, into its offerings for Windows Live. Despite a 10-year partnership agreement centered on the use of Bing on Yahoo's sites, Microsoft and Yahoo evidently remain fierce competitors in other online arenas, such as e-mail.

Yahoo insisted in an Aug. 24 press conference that, despite an agreement with Microsoft to power search on its sites using Bing, it still remains a competitive player in the online area of front-end user experience. That compelled a response from Microsoft, which touted Windows Live as superior to Yahoo's offering.

"Windows Live has already made a big bet on e-mail and its role as people's core communication vehicle, especially in the United States," a Microsoft spokesperson responded in an e-mail to eWEEK. "We're also focusing on simplifying people's online experiences, offering the ability to have a single center of gravity on the Web where a person can check their mail and stay up-to-date on what their contacts are doing across the Web."

The competitiveness between Microsoft and Yahoo over user experience suggests that, despite the 10-year agreement that melds the two companies together into a competitive front against Google, both are still determined to seize individual market share in areas such as e-mail.

Under the terms of their partnership, Microsoft's Bing will act as search engine for Yahoo's sites, while Yahoo takes over worldwide sales duties for both companies' search advertisers. Once fully implemented, the deal will potentially give Bing a U.S. search engine market share of nearly 30 percent, versus an estimated 65 percent for Google. Microsoft has repeatedly insisted that the deal will improve Bing by feeding it more data from an increased user base; however, analysts have argued that even an enhanced Bing will have trouble threatening Google's market share.

During its Aug. 24 press conference, Yahoo suggested that it remains an independent entity despite the Microsoft search engine powering it.

"The agreement calls for Microsoft to supply us with algorithmic search results, images and video," Prabhakar Raghavan, senior vice president of Yahoo's Labs and Search Strategy, told the assembled media. "We will be free to innovate on top of that layer."

Raghavan went on to suggest that Yahoo's focus is now on user experience, boosted by upgrades to Yahoo Search, Yahoo Messenger and Yahoo Mail, even as it no longer participates in the "megawatt war" of search engines indexing billions of known Web pages. Yahoo Search has been adjusted to pull in results from Facebook, LinkedIn, Twitter, FriendFeed and other social networking sites.

Microsoft's spokesperson insisted that Windows Live already possessed those innovations, relating to "sites like Facebook, Twitter, Flickr, etc., and integrating products and service[s], including introducing Bing technology directly into our services, with upgraded search functionality embedded in Hotmail through quick add."

Should the competitiveness between Microsoft and Yahoo reach a point where the partnership is no longer tenable, a contract provision allows Yahoo to escape. If Google's RPS (revenue-per-search) query rate becomes higher than the combined RPS rates of Microsoft and Yahoo, then the alliance can be severed; after the deal's five-year mark, Yahoo can terminate in the event that Yahoo's RPS rate in the United States is less than a percentage of Google's estimated RPS on a 12-month average.