Microsoft Yahoo Search Deal and Windows 7
The release of Windows 7 was, and still is, really important in terms of Search – because of the fact that Windows 7 would have IE8 as the default browser and Bing would be the default search provider.
However, the Microsoft Yahoo search deal greatly magnifies the amount of damage the release of Windows 7 could do.
Importance of Microsoft and Yahoo combining forces
- Bing goes from 8% market share to 28% market share.
- Yahoo sales team can go out and get a bigger share of the search advertising market.
Competing with Google when Bing is at 8% and Google is at 65% was an exceedingly difficult proposition for Microsoft. Bing at 28% vs Google at 65% gives Microsoft at least a partial chance. Even if Bing doesn’t get to more than 30-35% there’s still a HUGE amount of value in being a strong #2 in search.
Kevin Newcomb at Search Engine Watch thinks the deal is a win for Advertisers -
Microsoft’s adCenter platform is widely considered superior to Yahoo’s Panama, and with enough volume could offer a viable alternative to Google AdWords. Not a Google-killer, mind you, but a credible place to spend search advertising budget in addition to Google.
As do most of the advertisers Search Engine Watch talked to.
Terms of the Microsoft Yahoo Search Deal
Courtesy ReadWriteWeb -
- 10 year agreement. Microsoft acquires exclusive license to Yahoo’s core search technologies.
- Yahoo will get 88% of search revenue generated on Yahoo’s sites during the first 5 years.
- For next 5 years, terms will be discussed at end of first 5 year term.
- Display advertising businesses will stay separate.
- Bing will be the exclusive algorithmic search.
- Limits the data shared between the companies to the minimum necessary to operate and improve the combined search platform.
The Wild Card – Windows 7 and the power of the default
Let’s assume that all the new users using IE8 on windows and getting Bing as the default gets Bing 5% of the search market.
- When it’s Bing by itself (without yahoo) that’s a jump from 8% to 13%. Great, however, not that significant. Since Yahoo would still be #2 at 20%.
- With a combined Microsoft-Yahoo Search, Bing would go from 28% to 33%. Suddenly it has more than half of Google’s share.
There are a lot of different moves Microsoft is making, and at some point they will begin to add up -
- Stealing the Verizon search deal from Google.
- This tie-up with Yahoo.
- Windows 7 release.
This is one of the more visible moves – However, even the little ones add up.
Windows 7 also makes Microsoft stronger
Mr. Ballmer has said that Microsoft is ready to devote 5 to 10% of revenue to Search for the next 5 years.
- In the last quarter, Microsoft’s revenue was $13.1 billion.
- For the year ending June 30th, 2009, it was $58.4 billion.
- Across 5 years that translates to a gigantic $292 billion.
- 5 to 10% of that is $14.5 billion to $29 billion.
As a comparison, Google’s annual revenues are in the region of $21 billion a year and their expenses are $9 billion a year.
Microsoft is willing to spend 33% to 60% of what Google will spend over the next 5 years.
Signs are that Windows 7 is going to be a big hit. That would mean much more revenue for Microsoft, strengthening of Microsoft’s hold over the PC market, and more money in the coffers to devote to Bing and Search.
Microsoft has added the ace of Yahoo’s market share to its Windows 7 ace. By the end of the year we’ll know exactly how significant Windows 7 is.
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Filed under: Microsoft