How the Microsoft-Yahoo Deal Could Backfire to Googles Benefit

by Clint Boulton

Google is having a devil of a time beating back the position that it is not hoarding data on users and infringing privacy. Its acquisition of DoubleClick, its broader penetration into the Internet with Google Book Search and its new behavioral advertising approach have attracted the interest of DOJ antitrust chief Christine Varney.

With this partnership, Varney has a new concern: whether or not the Microsoft-Yahoo deal hurts competition and consumers. The decision whether to approve or nix the deal could go on for months. Google can use that time to change the perception of it as a data-hoarding search engine.

Google could do a number of things to innovate, rather than just iterate, on its search engine. What if Google opened its tool bar data to third-party programmers? This would foster a grateful developer ecosystem that Varney, the FTC and others would have to recognize.

Some experts think the Microsoft-Yahoo deal will force Google to take stronger user privacy measures. Jules Polonetsky, director of research group Future Privacy Forum and formerly chief privacy officer at AOL and DoubleClick, told the New York Times that the Microsoft-Yahoo alliance could force Google to match the competing partners&singlequot; strict privacy policies.

With Bing already indexing Twitter tweets, Yahoo will likely add this capability. This will force Google to do the same, which will benefit the majority of the world’s searchers, who will be able to find real-time info through Google. This will enable Google to retain searchers thinking of leaving for Bing or real-time search startups. Google retains its power.

The partnership could spur Google to buy small search and social startups to differentiate its offerings. In lieu of speedy scaling, acquisitions nicely fill holes. To echo the previous slide, there are a number of real-time search engines Google could target, including OneRiot, Collecta and Crowdeye.

Remember when Microsoft failed to buy Yahoo last year and lots of key Yahoo search executives left Yahoo for Microsoft? With most of those plum roles filled, Yahoos on the search team who got passed over the first time may get fed up and seek jobs at Google.

Many analysts say the deal means Microsoft is chasing only Google. But flip that coin: Now Google only has to worry about Microsoft in the broad Web search arena. Instead of Microsoft and Yahoo taking separate shots at Google, Google can go toe-to-toe with Microsoft-with more than twice the search share in its punching arm.

Bing has been enjoying some percentage point gains in the first two months of its life. Partnering with a struggling Yahoo smacks of desperation and will keep Google users confident they are on the winning team and could trigger some Bing or Yahoo users to go to Google.

Assuming federal regulators approve the deal, Microsoft will have to rip out Yahoo’s search guts and replace them with Bing. Both companies have said it could be 24 months before the companies begin realizing returns from the partnership. That means Google has a couple YEARS to increase its search lead. That is time nothing, not even Microsoft’s $100 million marketing campaign for Bing, can buy.