What Would a Yahoo-Microsoft Merger Look Like? Part 3

The search world has been abuzz for the last week, since Microsoft launched a takeover bid of Yahoo. The $44 billion deal would reshape the search engine marketing arena, teaming the number two and three players into a solid number 2. But if the deal does go through, there will be plenty of integration issues.

We asked several search marketers for their opinions about a future that includes a combined Microsoft-Yahoo search engine. Specifically, we asked about:
1. The benefits of combining Panama and adCenter, or replacing one with the other.
2. The best way to combine the search and directories of each company.
3. The benefits Microsoft would see by adding Yahoo’s social networking properties, or how a Microsoft acquisition might affect those properties?

We shared part one yesterday, and now have parts two and three today.


Andrew Goodman, principal at Page Zero Media

1. The benefits of combining Panama and adCenter, or replacing one with the other.

There are several benefits. Higher volumes make data analysis easier for marketers attempting to refine campaigns. Features that Yahoo doesn’t yet offer, like demographic bid boosting, can be incorporated in a combined platform. Geo-location should become more accurate. And Microsoft’s new analytics platform, Gatineau, would be integrated and allow the combined platform to provide a stronger alternative to Google’s products.

2. Best way to combine the search and directories of each company.

There should be significant overhauls of how search is approached by these companies – but again, the combination of the #2 and #3 search players would provide a lot more data, thus faster analysis of user clickstream behavior, which in itself bodes well for the accuracy of organic search. Toolbar integration with the browser would now focus on a single engine, again, possibly allowing 1 + 1 to equal 3 in the attempt to regain some market share from Google.

3. The benefits Microsoft would see by adding Yahoo’s social networking properties, or how a Microsoft acquisition might affect those properties?

A larger company will do well to look beyond simply Yahoo’s existing social networking properties, and will have the funds to increase stakes in popular platforms such as Facebook, or whatever the next hot social networking platforms turn out to be.

Barbara Coll, CEO of Webmama

I look at it from my client’s ROI point of view and I don’t see it being a good thing. We are down to 2 main search engines now.

While everyone else is thinking about the benefits of having Yahoo’s user base merged with MSN’s, I just see it as one less media outlet for advertising. Maybe I should say one half less, as I could envision the integration of Yahoo and MSN search distribution outlets create maybe 1.5 times the reach that they do separately. In the pure search advertising world, no matter how low the traffic volume, we need more opportunities, not less.

Danielle Leitch, EVP of client strategy at MoreVisibility

Microsoft is such a dominant player in their core field, and globally as an enterprise, that their lackluster performance in search has been disappointing externally, and I can only assume internally. With declining market share of search users going into single digits, what is a mega-corporation to do but make a massive acquisition or partnership for distribution? That will make this combined force a very viable competitor to Google ….

As far as the transition and interface for CPC, I will hope it is methodical and a combination of both, taking the pros of each and blending into one.

I am concerned that this will up the ante on pricing for cost per click, so time will tell on that.

They need to really consider analytics now. Yahoo has always had a very good tool, long before Google Analytics, called Marketing Console/Search Optimizer. It was never promoted publicly as well as it should have been. If MSN can spin this with their PR and the acquisition then I would be happy with their full suite services to include media. Now Google really needs to consider this since a sole competitor would have lock down on most of the ad space out there and tremendous behavioral demographics data… to complement search!

This is extremely exciting times for our industry – I am eager to watch this unfold and hope that MSN can use some of the valuable Yahoo features to complement some of the good work thy put into adCenter and display.

Fionn Downhill, president of Elixir Systems

My first impression is that this could be a very good thing for the consumer.

With Yahoo’s organic strength and MSN’s higher quality paid search, combining the two should provide a much stronger product. If they can capitalize on the publicity the merger will create – build enough curiosity when they launch their new engine and deliver on the promise, then they stand a chance of creating momentum and capturing more search traffic. However, they will have to tread carefully to not lose the things that are already working in each system and to not turn off their existing loyal customer base.

Yahoo is stronger in local search than Google, and is positioning itself with social media products that they are testing integrating into their SERPs. The combined company should be able to offer demographic targeting to advertisers that will far surpass what Google is testing. They’ll have a much stronger content network with Yahoo’s existing sites and MSN’s new partnership with the Wall Street Journal Digital network.

Kevin Lee, executive chairman and co-founder of Didit

1. The benefits of combining Panama and adCenter, or replacing one with the other.

AdCenter is not perfect, but it has better targeting options than Panama, and the Microsoft tech team will want to continue development on a .net platform. Panama will be history.

2. Best way to combine the search and directories of each company.

Yahoo won’t need to touch the directory, but I would expect that search will be powered by Live. No reason to have separate databases as they both are fairly relevant.

3. The benefits Microsoft would see by adding Yahoo’s social networking properties, or how a Microsoft acquisition might affect those properties?

Microsoft could combine messenger/IM platforms as well as integrate in social networking. That provides better ability of media buyers to target.

Lance Loveday, CEO, Closed Loop Marketing


If they’re smart, they won’t even try to combine these two systems. Just look at how hard/painful it was for Yahoo to roll to Panama. The technical and organizational complexities of trying to integrate these two fundamentally different systems would suck the life out everyone involved and take years during which the advertiser base would be alienated and grow that much more attached to Google. They’d be much better served by choosing one on which to hang their proverbial hat and working from a single code base in the long term. The transition period will be difficult enough without having a muddled product strategy. Frankensteining these platforms together would be disastrous, in my view.

One of the reasons for Google’s success is that they’ve built a phenomenal platform that is fast and relatively easy to use. If the Microsoft/Yahoo strategy is to compete with Google head-on by providing a universal self-service advertising platform (and I’m not totally sure it is – but that’s a story for another time), then it seems like a no-brainer to go with AdCenter.

Here’s why:
* The main complaint about adCenter to date has been the lack of volume. Problem solved.
* Panama is the older and seemingly less flexible of the two.
* There is general consensus among advertisers that adCenter is easier to use (and more than a little Google-like, ensuring a less steep learning curve for the legion of advertisers that have yet to even try MSN due to the conventional wisdom about not having enough volume to make it worthwhile)
* Beyond being the acquiring company and much bigger dog, it’s been rumored that Microsoft has a reputation for doing things their way. I think they’re probably too much in love with their own stuff to give up on it in favor of Yahoo’s clunkier platform, even if it would make for an easier transition.
* The demographic targeting capabilities within adCenter could become a real differentiator when married up with Yahoo’s audience data.

Some predictions:
* The transition period will be painful for everyone no matter what. Better to make the hard decision about which platform will win out and communicate a clear transition plan ASAP. Please don’t drag it out.
* Microsoft/Yahoo will make some pretty ugly distribution deals in order to buy some market share. Good news for publishers.

Mark Jackson, CEO Vizion Interactive

This sounds a lot like AOL Time Warner (I worked for AOL Time Warner, just after the merger). Each company already has issues that they’re trying to overcome, and now we’re talking about combining 2 companies – and their issues – into one company.

I’ll have to take a wait and see approach. Combining two companies of this size is never easy. The cultures couldn’t be more different.

Matt Naeger, VP and general counsel at Impaqt

If Yahoo accepts Microsoft’s proposition, it will finally level out the playing field in the search game. According to Microsoft executive Kevin Johnson, “the goal is to create a more credible alternative to an increasingly dominant player.” This proposed combination has the potential to truly integrate search into other mediums.

From a technology standpoint, Microsoft built adCenter from the ground up to integrate all forms of advertising into one bidding platform. With Friday’s announcement, Microsoft truly put the stake in the ground and basically said that they are going to beat Google to the evolution of where all bidding is going.

Additionally, what the purchase of Yahoo means for Microsoft is an extension network of other types of mediums that will fit their need for increased volume and increased distribution. This is needed in order to really compete with Google’s monopolistic power.

Microsoft’s problem in search has always been their fight to gain market share. With the purchase of Yahoo this problem is solved. By buying the only other relatively large search competitor, Microsoft will move into a strong second with Ask.com coming in at a distant third.

The long-term value of the acquisition resides in the fact that Microsoft’s evolution will not be limited to search. Yahoo’s media network will give Microsoft the ability to innovate in emerging mediums such as video and mobile in addition to increasing value for advertisers.

Mike Grehan, CEO of Searchvisible

Just a quick aside that deserves a mention is the combined subscriber base of these companies. One of the strengths they both had against Google was that they had some demographic data about their end users. Google might have the biggest end user base, but not the biggest subscriber base.

With MSN/Yahoo together, they have a whole lot of information about their end users and a much better chance of being able to fine tune advertiser targeting than Google has right now.

Of course, the combined reach of the organic database will also see a major change in the relevancy of results as they both have a lot of end user data in that space too.

Richard Zwicky, CEO of Enquisite

I think with recent economic events, with profits sliding, and its difficulties regaining traction in search that it hoped for, the timing is right for Yahoo

Microsoft’s strategy has always been about the long-term. Not to worry about catching up and beating Google today or within the next few months, but to plan for years from now. With tremendous resources available, Microsoft has this luxury. Conversely, Yahoo was the “King of Search” (and directories) for years. This was in spite of the fact that until the Overture / Inktomi / Altavista /AllTheWeb acquisition, they outsourced their search results. Yet, they were the destination of choice through the early years of the Internet.

Today, they still are one of the most important destinations in the world. Yahoo mail is ubiquitous, even more so than Hotmail. The combination of MSN and Yahoo would pose Google’s biggest challenge yet. It would also open the door to Ask finally making inroads. Let’s face it, insofar as far as user adoption rates, MSN hasn’t gotten search or adCenter right yet, and while they are getting some great distribution deals in place, they are still playing catch-up. This deal would allow them to take a leap forward.

I don’t think this merger will change anyone’s search trends this year. But that’s not the strategy. It’s to be the leader five years from now.

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