Visibility

Implications of the Microsoft-Yahoo! Merger

After trudging through nearly six months of red tape, the deal between Microsoft and Yahoo! is now official. In mid-February, antitrust regulators in the United States and Europe cleared Microsoft to take over Yahoo!’s search business. This merger dubbed the “Search Alliance” by both companies, but referred to as “MicroHoo!” by the rest of us is extremely exciting for the search industry. The two-horse race is now on, and it will push both companies to stay innovative in the search arena.

I’ve often felt that if Microsoft didn’t fully get behind search marketing, it would only be a matter of time before Google was the only player in the space. And we always see a lack of innovation when this happens. Most companies are reliant on Google for the vast bulk of their ad spend, but that’s not the most ideal situation to be in. It works, but when you have another larger player like the MicroHoo!, you potentially have another large entity to rely on.

While the switch won’t occur until late 2010, at the earliest, I believe it’s extremely important to understand the changes that will occur and how they will affect search marketing campaigns. The following areas stand to see the most changes:

Paid Search

A general outcome of the merger will be a larger audience (nearly 577 million searchers worldwide, according www.searchalliance.com, the site created by Microsoft and Yahoo! to discuss the merger), additional volume and increased relevancy, quality and conversions for all paid search advertisers. These benefits will be due to more robust control on the backend and increased transparency. Microsoft, after all, is a technology company.

Yahoo! currently treats standard industry terms differently than the other engines. Yahoo! uses advanced and standard match, instead of broad, phrase and exact match, which has created a number of difficulties for our clients. Microsoft adCenter remains consistent with industry standard definitions. Those currently advertising on Yahoo! will surely benefit from the adoption of Microsoft’s matching capabilities.

SEO

With paid inclusion gone (Yahoo! cancelled it at the beginning of this year), we see great opportunities for those companies that are proficient in search. Back when Yahoo! was still doing paid inclusion, some keywords were nearly impossible to rank on the first page without paying a CPC price. Now that Yahoo! has cancelled it and will be changing to Bing’s algorithmic search engine, ranking will go to those with better SEO skills, rather than those willing to pay the most money.

Content Network

The fate of the engines’ content networks is still unclear. As of right now, the trade commission has made it clear that display advertising must remain separate; yet, the issue of content network inventory has not been addressed. Therefore, I can only offer an educated conjecture: the two sites will come together, aligning two of the largest trafficked content networks on the web. On their own, neither company had been able to really make an impact in the marketplace with a self-served system. The inventory that could be started and stopped by a flip of a switch (a la AdSense) would be a powerful network, as long as adCenter progressed. All the advanced-targeting capabilities that come with a personal-login site wrapped up in a self-serve application would give companies a great opportunity to generate a large amount of qualified traffic. Google relies on domainers and other content sites for distribution, but MicroHoo! is poised to monetize both networks with adCenter. This will be their major advantage, because they own the content as well as the ad serving.

In the end, it comes back to the realization that Microsoft is a great technology company. Its major downfall has been the lack of scale needed to really test its software effectiveness on search traffic. Knowing that they have such great content and an extensive user base, I always felt that Microsoft, as the third largest search engine, could develop the technology needed to compete with Google. It just needed a much larger sample of search queries running through its network. With this search alliance, MicroHoo! may just have the search volume it needs to legitimately battle Google.