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Yahoo Microsoft Search Deal: 10 Most Interesting Plot Lines

Things That Make You Go Hmmm...

Wednesday, July 29, 2009 | Posted by Aaron Goldman

Posted In: Digital Marketing / Search Engine Marketing / Press / Press Mentions

If you read my Search Insider column today, you know I've been on a Top Ten list kick of late. You can also imagine what a dolt I felt like publishing the "Top Ten Ways to Use Search Data Beyond SEM" on the same day the Yahoo Microsoft search deal was announced. Give me a break though, my deadline was yesterday at noon! In an effort to save some face, I thought I'd chime in here with the ten most interesting plot lines -- aka unanswered questions -- surrounding this deal.

1. What does the deal mean for Google?

I've thought long and hard about this one and drew some conclusions on my digital marketing blog. I shared these thoughts with the New York Times for its coverage of the deal -- Advertisers Welcome Microsoft-Yahoo Search Deal. Here's what I'm on record with: "If Yahoo ignores its own search engine in the short term, the deal could actually benefit Google, said Aaron Goldman, managing partner of Connectual, a digital-marketing consultancy in Chicago. 'Yahoo, going forward, has very little incentive in the short term to spend any more money improving their search product,' he said. 'By the time this pact comes together, what’s now a 70-30 game could turn into an 80-20 game,' he said, referring to the approximate market shares that Google and the Microsoft-Yahoo combination have in Web search."

2. What will become of Microsoft's search ad sales team?

Microsoft's done a great job ramping up its search sales efforts since the launch of adCenter in 2006. It's effectively aligned with agencies and advertisers through dedicated channel, geographic, and vertical sales teams. I've been fortunate to participate in the Microsoft Advertising agency advisory council and have seen first-hand its commitment to fostering relationships with the community and incorporating feedback into its products and services. Having been through a situation where two top players in a category joined forces -- L90 + DoubleClick Media in 2002 -- I know that the resulting staff redundancy leads to layoffs. There's simply no reason to have more than one person calling into a given agency or advertiser. More than the implications of this to the businesses, I'm personally concerned about how this will play out as I have good friends working on the Microsoft (and Yahoo, for that matter) search sales teams. For their sakes, I hope Ballmer is true to his word when he said, "Given the huge opportunities in search and online advertising, we plan to redeploy most if not all affected employees into new high-priority functions."

3. Will advertisers increase their spend with the combined Yahoo/Microsoft search platform?

Another lesson I learned from the consolidation of L90 and DoubleClick Media is that 1+1 does not always equal 2. In many cases, advertisers that were spending $50k a month with me via L90 and $50k thru Doubleclick came in with buys at $50-75k on the combined network. For whatever reason, advertisers and agencies tend to look at consolidation as an opportunity to reallocate budget to test new channels. That said, the search space is not the network space and we're in 2009 not 2002. These days, most campaigns -- on both search engines and ad networks -- are run with tight discipline and the money follows the ROI. As long as the combined Microsoft/Yahoo search entity can deliver performance for advertisers, I have to believe it will hold on to its rightful budgets.

4. Will the deal convolute Yahoo and/or Microsoft's display ad business?

This one gets tricky. Remember what I said about it making sense to have only 1 person calling on each agency or advertisers? What happens when Microsoft wants to sell a search retargeting display campaign? Or a behaviorally targeted display campaign that incorproates previous search activity? Will Yahoo reps have to get involved? The press release states that the agreement "restricts the use of search data shared between the companies." So will Microsoft even be able to sell these types of campaigns at all?

5. What will become of Yahoo's paid inclusion platform?

This one is anyone's guess. On one hand it's hard to imagine Microsoft adopting a platform that it has long since shunned. On the other, it's hard to see Mirosoft conceding a viable monetization channel. With a firm #2 position in search, it would seem that Bing could afford to take more risks and not worry about the potential consumer backlash of blurring the lines of church and state. Then again, it can hardly afford to lose any more share to Google.

6. Will Microsoft incororate any Yahoo search features into Bing?

Under the terms of the deal, "Microsoft will have the ability to integrate Yahoo! search technologies into its existing web search platforms." Operative words here being "ability to." Whether it chooses to integrate features like BOSS, Search Monkey, and RAIS remains to be seen. On one hand, I can see Microsoft wanting to make Bing a best-of-breed combination of both products. On the other, I can see pride getting in the way what with how far Microsoft search has come in a relatively short time.

8. Will CPC's on the combined Yahoo/Microsoft search platform rise?

The conventional wisdom is that loading more advertisers into one bidding system will create increased demand and price inflation. Remember, while the inventory grows, the targeting does not. In other words, there may now be 2 million searches for "Keyword X" available to advertisers thru adCenter where there were only 1 million previously. But, bids are set at the keyword level and there will now be some  500,000+ advertisers competing for these same keywords where there were once only 100,000-ish. The truth is CPC's will fluctuate, as they do today, differently for each vertical and each account. Some folks may see increases, others may see decreases. For all the analysts reading this, though, I do expect an overall increase in CPC's leading to a lift in overall effective CPM per search-results page -- aka revenue per search -- for Bing.

9. Will the deal pass regulatory approval?

Microsoft and Yahoo were quick to roll out a site called "Choice. Value. Innovation." clearly pandering to the regulatory authorities. You can be sure that the same Microsoft lobbyists that were so effective in blocking the Yahoo/Google deal will be all over this like stink on a monkey. For what it's worth, the Financial Times has an interesting take, suggesting that the number 2 and 3 players in a market joining forces can be troublesome. What may be even more interesting is to see if Google takes a stance opposing and lobbying against the deal given the potential outcome I outlined in question #1 above.

9. Will Danny Sullivan lose his voice and/or fingers providing marathon coverage of the deal?

The man is a machine. It seemed like Danny made the rounds on every news outlet -- print, radio, not sure about TV, though?? -- opining on the deal terms, implications, etc. He also got in some great questions to Carol Bartz on the conference call this morning and via Q&A with Microsoft SVP Yusuf Mehdi and Yahoo EVP Hilary Schneider. Topping it off was this terrific layman's summary on Search Engine Land of everything you -- and your mother -- might need to know about the deal.

10. What's the deal with that big ass pen?

If you haven't seen it yet, there's a great pic of Ballmer using an oversized purple Yahoo pen to sign the contract with Bartz watching on in amusement. Andy Beal started a caption contest on Marketing Pilgrim that's elicted some great responses -- 2 of which are mine including 1 that I can't believe I actually submitted -- and it's also making the rounds on Twitpic with some funny comments.

(Image Source)

With the ups and downs of the Microsoft/Yahoo saga over the past couple years, clearly the announcement of a deal today is not the end of the drama. For every question this deal answers, another is raised. The one thing that's certain is that the search marketplace is only going to get more interesting -- if not competitive -- over the coming years. And, I for one, am looking forward to having more fodder for search top ten lists.

Update 7/30: MediaPost picked up my POV on the implications of the deal for Google as outlined in question #1 above in its article today, "What Microhoo Deal Could Mean." Here's the excerpt...

"But with the deal taking up to 36 months to pass regulatory approval and implement, Connectual Managing Partner Aaron Goldman wants to know if Yahoo will continue to invest in keeping its 'search engine up to snuff.' In a blog post, he points to Yahoo CEO Carol Bartz's comment that with Microsoft powering Yahoo Search, the company will have an opportunity to focus on the things it does best, such as mail, finance, news, sports, entertainment and mobile.

'With Yahoo's search product being left to rot, can it really be expected to maintain its 20% market share?' Goldman writes. 'Hardly. And where are those users going to migrate?'

Update 7/31: ClickZ has a quick Q&A with Yahoo's Hilary Schneider and Microsoft's Yusuf Mehdi.

One thing that caught my eye was this quip from Medhi speculating about the potential for incorporateing Yahoo seach features into Bing as I discussed in question #6 above...

"It's safe to say Yahoo's done a lot of fantastic work across a lot of great areas across both algorithmic and paid search. It's safe to say we'll incorporate the best [technologies]."