After more than a year of an on-again, off-again courtship with many twists and turns, Microsoft and Yahoo finally announced a search partnership that will see Microsoft Bing power Yahoo search, with 88 percent of the search advertising revenue going to Yahoo in the initial stages of the 10-year partnership agreement.
The deal is a clearly boon for Yahoo. The company should be able to substantially reduce its work force, while potentially seeing an increase in advertising revenue through its use of the Bing search engine. Yahoo officials say they expect their company's profits to rise as a result of the partnership.
For Microsoft, the Microhoo deal isn't so clear-cut. Microsoft is counting on the Yahoo deal to instantly increase the market share of the Bing search engine with the hopes of significantly cutting into Google's share over time.
However, the company will be doling out bundles of cash to Yahoo. Worse, Microsoft will be forced to pay more expenses, since it will soon start running a larger, more-trafficked search engine. It could be an expensive proposition just to get closer to Google in the search market.
But that's exactly what Microsoft has planned. So, as the companies start moving toward regulatory proceedings, it's time to consider how the deal will impact the enterprise. Certainly, companies use different search engines to get work done. Although many are probably using Google now, it's conceivable that more users will switch to Bing as a result of the Microsoft-Yahoo partnership. But regardless of which company wins, one thing is certain: This deal is good for businesses.
1. Microsoft's money
Microsoft has billions of dollars of cash on hand. But with less than 10 percent search market share, it probably wouldn't have made much of a difference how much money the company threw at Bing. Thanks to Yahoo's market share, Microsoft will soon have almost 30 percent of the market under its control. That puts it within striking distance of Google. More importantly, it gives it the market share it needs to justify spending cash to add more users.
2. Google's money
Google has some cash of its own. But with Microsoft creeping up and capturing market share, Google might have to use some of its own cash to improve its search, invest in companies or simply match Microsoft dollar-for-dollar wherever it's spent. The arms race is on. And companies should be excited.
3. Competition is always good
Competition usually spawns better products. The reality is, Google was coasting. It didn't have to worry about Microsoft and Yahoo. But now that this deal has been reached, it does. It's still far ahead, but it's not dominating the space anymore. Because of that, it might start improving its search engine sooner than some might think.
4. Relevance will be king
Now that Microsoft and Yahoo have teamed up, relevance will play a major role in both Google's and Microsoft's strategy going forward. Both companies will try to improve their algorithms to ensure their results relevancy numbers beat the competition. That can only be good for the enterprise. Business people whose jobs require them to do a lot of online searching can expect to benefit from the results relevance battle if it forces both sides to truly improve the search engines.
5. Microsoft services will be better
Although Bing has been touted as a viable alternative to Google search, there are still millions who prefer Yahoo's search over any alternative. It's a great service. And now that Microsoft will be controlling it, it will be Microsoft's great service. That can only mean that any new applications Microsoft incorporates its search into will be better. We all win.
6. New ideas will emerge
Competition not only makes current products better, it breeds innovation. Microsoft and Google will start trying to find unique ways to win the user's attention. That will likely come through new ideas that could revolutionize the search business.
7. Incremental updates are gone
Following that logic, it's likely that incremental updates won't be so popular. When it was dominating the market, Google could get away with slight improvements. Once Microsoft takes control over Yahoo Search, those slight improvements might not be enough. Google will need to impress users. And only big updates will do that.
8. Microsoft has a vision
Microsoft realizes that its future is probably not rooted in software. It understands that it needs to make a play for the Internet now if it wants to be successful over the long term. This Yahoo deal was step one of many for the company. It can only mean more Internet- and search-focused decisions that will have a real impact on the enterprise.
9. The deal isn't done
Microsoft and Yahoo expect regulators to approve the deal in early 2010. That gives Google almost a year to improve its service for the fight. It also gives Microsoft the time it needs to form a strategic plan around its operation. I fully expect to see some major news hitting the search space from both Google and Microsoft right around the time Microsoft gains approval for the deal.
10. Google was too successful
Google's success is due to the outstanding job the company has done improving its search engine. But over time, success breeds complacency. In fact, Google might have eventually become the Microsoft of the online world-it would have enjoyed so much dominance, the service would have started to slip. But now that there's a real contender in the market, Google can't be complacent. It can't rest on its dominance. It needs to fight to maintain it.
And that can only be good for the enterprise.