Microsoft and Yahoo are coming together. This baby step toward diversifying the market is a positive move for the search world, but how will it impact advertisers attempting to reach searchers?
Competition in the search marketplace has been a dream for marketers since Google began its domination of the field. Aside from the potential to improve revenue streams and strengthen Yahoo's and Microsoft's market share battles with Google, the deal could have significant impact on many aspects of the digital marketing industry. Advertisers should start asking some serious questions about those effects, and what adjustments they should be making (assuming the deal meets with regulatory approval in the first place).
According to the recently launched Microsoft-Yahoo site, the new and improved "Yahoocrosoft" relationship will feature 10 wonderful years of Microsoft licensing Yahoo's natural, or "core," search technology, while advertising will be fulfilled by Yahoo's sales force and Microsoft's technology exclusively. Exclusivity here, of course, doesn't take into account the thousands of resellers currently in place for both companies via API or agency relationships.
Advertising efficiency seems to be the biggest benefit of this combination of technical resources and search technologies. The previously rumored upfront cash payment seemed unlikely in the absence of resource acquisition, so the revenue share seems to be the most suitable solution for both parties.
A Bing and Yahoo search deal will likely shift focus away from the plain old search box page that has made Google so successful. Yahoo has become better at monetizing available internal assets, with in-text drive to search capabilities and the like. Both MSN and Yahoo have incredible strength in the world outside of directive and contextual search, so the real meat of the issue will come in the details of revenue share from search ads.
Of course, search ads appear everywhere across the web -- on maps, videos, local pages, other users' websites, etc. This creates two large sticking points for marketers -- the value of clicks and revenue distribution -- and raises several questions that Microsoft and Yahoo will have to work out, including the following: Is a directive search click (from a search page) more valuable than one from a map? What about a video search click? Is one partner's strength in driving click activity from one area more valuable than another?
Another big question involves the choice of technology to be used to implement search ads. As I see it, although both Yahoo's and Microsoft's user interfaces could stand for an overhaul to create cleaner, more friendly advertiser experiences (i.e., Googlization), Microsoft's AdCenter should ultimately be the keeper. Advanced targeting, integration abilities with other advertising initiatives, and speed of use make it the clear choice. Thankfully, it appears the deal is already headed toward making AdCenter the default.
A collaborative effort in building a better interface, along with the technology focusing on usability, advertiser efficiencies, and bandwidth for facilitating advertiser participation, should be the first focal points of technical efforts on the advertising front.
One more issue that has yet to be discussed: the large-scale advertiser relationships both Yahoo and MSN have that drive advertiser revenue. One less competitor in the search space is not great news for those making their living as search experts, but large-scale and other non-search agencies rarely complain about being able to mark the search box "completed," so they can focus on higher-margin media and creative.
Search technology will continue to evolve and converge with other digital arenas, like platform gaming, mobile, and other cute areas that we have yet to imagine (like, say, point-of-sale supermarket shopping). The impending challenges of integrating cultures and technologies simultaneously will undoubtedly rear their ugly heads, eventually.
What comes next?
The quiet war between Microsoft and Google, with both crying "foul" and "monopoly" in the mainstream press, will only increase, and there will be increased scrutiny akin to the recent European Commission action that requires Microsoft to "invite" competing browsers. Shouldn't Google have to "invite" competing search engines?
At the end of the day, I am reminded of an old lawyer joke punch line. What do you call 1,000 lawyers at the bottom of a lake? Today's announcement signifies "a good start" for both Microsoft, Yahoo, and their legal teams. Advertisers, on the other hand, better spend some time working on value propositions.
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