Can Yahoo & Microsoft Ever Catch Google?
Google is not easing up in terms of search market share and acquisitions. I need not say it but Google is a formidable force that Yahoo and Microsoft are not going to overcome easily. Consider the following: Recent search engine market share figures (May 2007) show Google with 57.4%, Yahoo! with 22.9%, MSN with 8.8% […]
Google is not easing up in terms of search market share and acquisitions. I need not say it but Google is a formidable force that Yahoo and Microsoft are not going to overcome easily. Consider the following:
Recent search engine market share figures (May 2007) show Google with 57.4%, Yahoo! with 22.9%, MSN with 8.8% and Ask.com with approximately 3.6% of the search market. These are average figures for data collected by Hitwise, NNR and comScore.
Google’s last few steps, notably the purchase of YouTube.com and DoubleClick, will also prove to be scary for the #2 and #3 players in the industry. Google has taken some bold steps trying to extend its market lead to areas outside of search. Google’s purchases show the company is interested in a bigger piece of the branded advertising pie including banners, videos and other online graphical ads. Currently, Yahoo! is considered the leader in branded advertising and they’ve recently increased their stake in Right Media (a competitor of DoubleClick) to 80% (a $680 million dollar deal). MSN recently purchased aQuantive—also a DoubleClick competitor.
Given the above information, what can Yahoo and Microsoft do to compete? Will they stay their existing courses or implement completely different courses of action? In this article, I suggest a few scenarios that could roll out as the search engine wars get hotter.
Microsoft and Yahoo joint venture
For now, merger talks between Microsoft and Yahoo are off. In the words of a Yahoo! official: “A merger between Microsoft & Yahoo! would be like two large ships colliding.” Merger talks may be off but there could be a strategic partnership in the works between Microsoft and Yahoo!. The two companies could combat the Google threat by launching a joint portal that would allow the companies to effectively pool their resources and stop wasting money competing against each other.
A joint venture could lead to other larger initiatives down the road. Smaller steps are probably a wise place to start given the size and ingrained culture of each company. This won’t be an easy feat but may prove to be a winning combination if they can successfully work out the details. Microsoft could provide technological know-how and Yahoo! could contribute media expertise.
The joint venture could also give the two companies a significant head-start in terms of branded advertising. Unlike Google, both companies are currently fairly well positioned to capitalize here. From 2005 to 2006, display and rich media ads grew 39% to 4.9 billion dollars (for more information, take a look at this IAB & PricewaterhouseCoopers report). Also, targeted online display advertising (behavioral targeting) will soar from $575 million this year to $1 billion in 2008, and the market will almost quadruple by the end of 2011, reaching $3.8 billion.
Yahoo & Google joint venture
Another option is for Yahoo! to get out of the direct search game and have Google provide results for Yahoo! search. In terms of dollars and cents, with the right distribution deal from Google, Yahoo! could make a huge amount money from search with virtually no headaches. The fact that they’re #2 in the game could come in very handy in this particular scenario. Depending on the partner, distribution deals can be very lucrative (sometimes 80% of revenues for the distributing partner).
Yahoo! could then capitalize on other areas of online advertising—notably branded advertising and/or social media. In terms of social media, Yahoo! owns both Flickr and del.icio.us and has recently tried to acquire Facebook. If this area is played well, Yahoo! could make a significant mark in social media.
This is obviously a scary scenario. With this, Google could potentially control over 80% of the market. For the industry to thrive and innovate, we need more than one significant player in the search arena. With huge growth expected in both search and display advertising, and the new Panama system barely out of the gate, it would be a shame to see Yahoo resort to this option so early in the search game.
Microsoft & aQuantive
Microsoft believes there’s plenty opportunity outside of search. And they’re placing bets on it—six billion dollars worth, to be exact. They believe the assets they’ll acquire through the aQuantive deal including the company’s ad placement service (Atlas) and the ad network (DrivePM) will allow them to take a leadership position in display advertising. “This really is a game changer for us in terms of what happens with advertising, as the display market explodes,” said Yusuf Mehdi, Microsoft’s chief advertising strategist in a CNNMoney.com article.
There are also opportunities in search for Microsoft. They could roll search into many of their products to increase market share. Although, Microsoft is losing software share to Mac users and additional competing products, I think there’s significant opportunity for Microsoft. In my experience, conversion rates on Microsoft web properties are excellent. Their obvious issue is search volume. If they’re able to capture a larger share of the market, they’ll be able to more widely demonstrate their quality and Microsoft may grow from there. This may be a far-fetched scenario to some but things have been know to change very quickly in the online world.
There are obviously numerous more possibilities and scenarios. I welcome your input on what you think may happen in the search arena—please comment below.
Mona Elesseily is director of marketing strategy at Page Zero Media, focusing on paid search campaigns and conversion improvement. She’s also author of Page Zero’s Unauthorized Yahoo! Search Marketing Handbook. She is currently working on the Panama version of the Y!SM Handbook (forthcoming May 2007). The Paid Search column appears Tuesdays at Search Engine Land.
Opinions expressed in this article are those of the guest author and not necessarily Search Engine Land. Staff authors are listed here.