Microsoft-Yahoo!: Combine, compete, crush

Will the Microsoft-Yahoo! deal really offer anything to users? Eventually, slightly better advertisements. The entire deal is a front for Microsoft to take on their arch-nemesis, Google. Here it is, explained, in gross detail. Article

Yesterday saw the announcement that Microsoft and Yahoo! would team up together and share each other's technologies to a degree. In short, Microsoft's search engine Bing, previously known as Live Search, would power Yahoo!, while Yahoo! provides Microsoft with the sales force it needs through advertisements.

I didn't really think about this too much when it was announced. Frankly, I was glad that the Microsoft-Yahoo! news was finally out and everyone could shut the hell up about it. That was until my best friend Elliot rang me earlier last night and started contemplating the deal over the phone.

Combine

You don't even need to read between the lines on this one. There are two main things to understand.
  1. What Yahoo! gets: Both CEO's of Microsoft and Yahoo! have made it quite clear in their intentions. Merging these two companies, on the surface, they intend to generate more money and provide "boatloads of value for our users and industry", as well as "accelerating innovation and bringing more value to advertisers and web users." Yahoo! will get 88% of the revenue with no cost, which will be good news for their sliding profits.
  2. What Microsoft gets: As Yahoo! CEO, Carol Bartz says in a phone interview, "Microsoft - who we know is maniacal about the search business, can take a run against Google."

That, to me, is basically it. Yahoo! gets its much needed profits in this case, and Microsoft which has plenty of profits over the course of the years gets to take a massive swipe at Google; something they have been wanting to do for years, especially in recent times after Google took their first offensive move. Now they have their opportunity.

The end user gets nothing. What you read before is corporate bull-talk for "you'll experience extremely little else to what you experience now". What will change, which you probably won't even notice, is that the advertising will get slightly more relevant to the user, and instead of having two search engines, you'll have one - Bing.

I think it is fair to say that most of Yahoo! Search has gone to a better place - the rubbish bin - with the exception of mail search and instant messaging.

Compete

This has clearly been on the cards for a while, and been going on behind the scenes for some time. My editor-in-chief, Larry Dignan, wrote extensively yesterday on the deal. Regulators will still need to give the all-clear on this because two huge companies combining with the sole aim of crippling another would most certainly elicit regulator questions. This could enable Microsoft-Yahoo! to begin "work" towards the end of 2010, which again suggests this has been going on for at least a year.

Even though Yahoo! Search on the face of it has gone, the code could well be used to make Bing better. It's important to point out that between Microsoft and Yahoo!'s sites, all you will see is Bing search. Under the hood could likely be some modifications to Bing, once Microsoft works out what Yahoo!'s code means, but as of yet nothing has been set in stone - or at least if it has, it isn't public knowledge yet.

A big problem which needs to be overcome is what the regulators say. Because my grasp of international law and computing law is limited to that of the UK alone (and even then, our computing laws are old and outdated), it is not yet known whether the European Commission can wade in and start pulling their weight around.

As Microsoft and Yahoo! are both focusing on their web portals in this deal, I can't logically see how the EC can input any influence, as EC decisions are made up of parliamentarians from each European country. This, then, would only affect countries in the European Union so ultimately it will be North America's authorities who are most likely to pick through the deal with a fine tooth comb.

Crush

Regardless of whether the EC gets involved again, something I hope that gets mentioned is the "hard to forget" court battle Microsoft had with the EU between 2004 and 2006. Amongst many things, one of the main issues was that:

"Microsoft abused its virtual monopoly in the computer world to muscle out smaller rivals, especially those that make media players and software for servers."

This in itself can be manipulated many ways to provide different arguments. Personally I see this as Microsoft using their dominance and virtual monopoly in the computer world, alongside Yahoo! and their lesser but still significant dominance and monopoly, to muscle out a rival. Regardless of whether Google is a smaller or larger rival, it shouldn't make the blindest bit of difference.

This is how the search engine statistics show at the moment. It's a rough guide because no matter how hard you try, statistics across a number of organisations vary, hence the need for the approximation symbol. Even if Yahoo! scraps their search engine and brings on Bing, it will combine the users from both sites and amount to around-about one-fifth of the US market share. Weigh this against Google which has roughly four-fifths of the US market share, you can clearly see that Bing still hasn't got the oomph that it needs to take on the search giant.

Google has said that the Microsoft-Yahoo! deal may hurt the competition, but also that it might reduce innovation. I believe at this point, and maybe even for the next couple of years at very least, Google is well and truly safe in what they have accomplished with their massive majority of the market share dominance. That is though due to people using it and wanting to use it. The Microsoft-Yahoo! deal forces at least those in the Yahoo! user camp to use Bing, should they not decide to go elsewhere.

What is likely however is the remaining competition such as Altavista, AllTheWeb, Lycos, Cuil and Entireweb could be left entirely out in the dark with little or no-one to defend them. Some would argue that these have low rankings due to the lack of quality the search engines have, the reduced number of resources or tools on offer, or simply that they haven't got their marketing tweaked. But they still have the right to be able to offer their service to whoever wants it. The Microsoft-Yahoo! reduces this by teaming up to provide one search engine.

The final point this student journalist wants to make is this somewhat poignant question. Is this how we want the next-generation of (in their own words) consumer choice and corporate innovation to look like? Leave a TalkBack and share your thoughts and opinions. After all, that is what it's there for.

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