Some Reasons Why The Bing-Yahoo Deal Is A Good One

Although the proposed union of Microsoft's Bing and Yahoo's search engines has led Congress to say that the deal warrants "careful scrutiny," such a merger of search giants could actually benefit the public. Here's why the Microsoft-Yahoo partnershipshould proceed, and why Google will likely flourish despite -- or because of -- it.

1. Search will improve. Competition always shakes things up. True, Bing and Yahoo are already competitors. But face it, they are weak ones. Together, Bing and Yahoo can pack a bigger punch. According to Web metric firm StatCounter, Bing climbed to 9.41 percent of the search market in July, up from 8.23 percent in June. Add in Yahoo's current 10.95 percent share of the market and that's 20.36 percent—still a distant second to Google's 77.54 percent, but formidable. It will be incumbent upon the players to offer the best product in order to increase their own market share. While Google's not likely to be torn asunder, it is likely that the search giant will more aggressively invest in R&D, new technologies, startups, etc., in order to remain a dominant force. Further, there's reason only to believe that the potential market will continue to grow, not shrink, so even one-fifth or one-quarter of that pie is still very appealing to Microsoft-Yahoo.

2. Yahoo will make money. Under the proposed 10-year arrangement, Microsoft's Bing search engine will be featured on Yahoo pages. That offers Bing more visibility, something crucial to a fledgling offering, even one backed by Microsoft. While Yahoo handles ad sales, Microsoft will pay Yahoo a whopping 88 percent of the search revenue generated for the first five years. Microsoft will also pay Yahoo $50 million annually during the first three years of the search agreement. Clearly, the arrangement is a financial boon for Yahoo, and the increased revenue will create a stronger company and more viable competitor to the likes of Google.

3. Profits from ad sales will rise. Yahoo's not the only company that can profit. As search technology improves, users will gravitate toward the best offering, and so will advertisers, which bid for the "right" to search terms. The advertiser with the highest bid per user click gets its ad next to the search results. In the end, advertisers are mostly concerned with the number of users who become customers; therefore, they will pay more for better ad-matching results.

Strong Start for Bing: Yahoo! and Google Lose Share

Yes we know its early, but congrats to the team at Bing.com. Even though Bing.com is not even 1 week old, it is already off to a strong start. According to the latest stats from Statcounter.com, Bing is now the number 2 search engine in America with 16.2% share. Google still is over 70% and Yahoo is third at 10%.

Pre-Bing, the Windows Live search was 6% share, Yahoo was a solid 13-14% and Google rarely went below 75%. A note about the Statcounter stats, because they seem to me the most accurate. Data ise based on aggregate data collected by StatCounter on a sample exceeding 4 billion pageviews per month collected from across the StatCounter network of more than 3 million websites.

The real question for Microsoft and the Bing.com project is will users keep coming back? Simply put can Bing.com get brand stickiness? I think the idea of Bing as Google killer is fantastical and thankfully it is not being thrown around in the media the way it was with Cuil.com. Furthermore, Google is not a vulnerable target, As an article in AdAge recently noted about a Google study: “Google has conducted internal tests, according to ‘people familiar with them, in which the company put its logo and treatment on another engine’s search results. Users still prefer the results with the Google logo, even if they’re not Google results.” There would need to be a fundamental change of users habits,and this doe snot happen over-night. I think Yahoo! should be much more concerned, I also think its good to hear the Microsoft be realists about their efforts in the Search Engine wars. As Steve Ballmer recently noted at the D7 conference ” [Bing]differentiates itself from Google. It might not appeal to everyone, but if it appeals to 20 percent of them, that’s a success.”

The real trick will be to see if the Bing 80 Million advertising campaign can solidify their spot as the 2nd most popular search engine and in the process, make some people change their Google only habit. Truthfully, the real goal is to create competition. Michael Arrington sums it up best : “whether Microsoft ultimately succeeds or not in ‘winning’ the search war, the competition is very good for the rest of the Internet. Google needs to be pushed to try innovating new things. And search marketing competition will ensure that Google doesn’t get too greedy. We don’t need Microsoft to win, but we do need to avoid a world with just one search engine that matters. Maybe Microsoft can win that lesser war, at least.”

Cheers,

Jenson