The conference call has happened, and despite saying it has a plan to digest Yahoo, Microsoft didn’t share that with the world. Indeed, at one point it was said any plan depended on what Yahoo’s leadership would suggest. That means it’s time for What If. Some thoughts below from me and contributing editor Greg Sterling. We’ve been IMing all day about the move.
Practically no one seems to know about the "flagship" Microsoft Live Search Brand. Hitwise stats, for example, show that of Microsoft’s 7.1 percent share of the US search market in November 2007, only 1.6 percent of those searches happened at Live Search. The bigger chunk happened at MSN, 5.5 percent.
In contrast, Yahoo has an excellent search brand. It existed before Google and was THE search engine for many years. Today, it still arguably remains synonymous with search. Abandoning Live.com as the flagship and putting efforts behind Microsoft’s Yahoo might keep the company’s efforts more focused and effective.
The challenge is that both Yahoo and MSN — the strongest search brands in a combined company — are weighted down by being littered with portal features. The Yahoo home page is heavy compared to the clean Google home page, though Google continues to play its long-standing "stealth" portal conversion by showing more people its iGoogle portal page and offering a "classic" option for those who dislike it.
A daring change might be to strip Yahoo of its portal look, making it more like the "pure search" Yahoo page here and migrate Yahoo’s portal folks over to MSN. It would be risky. It might capture the attention of those seriously seeking a Google alternative, but it might risk angering existing Yahoo people.
One thing seems clear. Microsoft with Yahoo simply could not run three search brands successfully. Indeed, the last thing Microsoft needs in the wake of its "Live" branding confusion is even more brands to puzzle people with.
Of course, Microsoft may disagree. Steve Ballmer said that both Microsoft loves the Yahoo brand and that there will be a Windows Live brand, since consumers want Windows on the web. We’ll see.
Microsoft has developed a robust ad serving platform that it currently uses for search ads, as well as other products. The main feature it lacks is actual search traffic — of which acquiring Yahoo will help immensely.
Yahoo, of course, rolled out its updated Panama ad serving platform over the past year. It had a huge success in moving a significant number of advertisers over to it without serious pain. Huge success — like doing open heart surgery with the patient still awake and somehow not noticing.
Since Yahoo has more advertisers than Microsoft, one has to consider that it would be the Microsoft platform that becomes the loser. It makes sense to keep the pain for advertisers to a minimum. That means moving the fewer people using Microsoft adCenter to Yahoo than vice versa.
Don’t expect Microsoft to see it that way, however. This is Microsoft driving the deal, and it wouldn’t be surprising to see corporate in-fighting and possessiveness neglect where most of your advertising customers are in place of turf protection.
Of course, complicating all this is that Microsoft is still digesting its acquisition of aQuantive to fuel its push into the display ad space. Well, according to Microsoft, that’s all done and went great (more on this below). And Yahoo is still dealing with buying BlueLithium and Right Media. In some ways, the time is right for all these things to be absorbed and consolidated. On the other hand, it means that Microsoft will lose some ground against Google if it gets the final go-ahead from the European Union over DoubleClick (and loses some of the oomph to fight that deal on anti-trust grounds).
This was touched on above. Yahoo has portal features; so does MSN. Does Yahoo Mail go away in place of Hotmail (ahem, I mean Windows Live Hotmail)? Is it Yahoo Videos or MSN Videos? Yahoo News or MSN News? At least Flickr will probably maintain its brand. Some people simply won’t want even a brand change from what works. And doing that change or any change potentially causes them to look at other options — say Google? Ironically, the consolidation, if not handled right, could deliver Google more portal customers than it may have ever hoped for in the short term.
Disturbingly, the answers aren’t clear from Microsoft yet. We’ve simply gotten general corporate talk, to be frank, that there are pluses to scale and combinations to be made. But how exactly things will get combined makes a great deal of difference, and you’d think investors would want to know that now. You’d certainly think that Microsoft at least has some more detailed preliminary ideas that they’d share.
Behind the scenes, technology is a key aspect to both the paid and editorial side of search. Here, integration seems less of an issue. The space is growing, and all three companies are after talent that’s in short supply.
One thing from the conference call that didn’t hold much water, however, was the idea that Microsoft would grow share with better technology. This came as an analyst asked about Yahoo having lost share, and how Microsoft was going to turn that around. Um — Yahoo pretty much hasn’t lost share. Microsoft has. But the answer was that better technology would increase relevancy, and that this would win out.
Maybe. But Microsoft has never suggested it didn’t have the technological prowess to pull ahead already. The opposite, actually — we had Microsoft touting proudly in the past that they would pull ahead of Google in "six months." It was only until this year that they said they matched Google and were better than Yahoo. If they’re better than Yahoo, the pitch that the technology combination will push relevancy higher and gain share doesn’t fly.
By the way, don’t forget that there’s still more integration going on: Microsoft To Buy Fast Search For $1.23 Billion covers the purchase of search technology company FAST that’s underway. At least in that case, enterprise search doesn’t duplicate what Microsoft would get from Yahoo.
Corporate Culture & Turf Wars
Microsoft talked a lot about how successful it had been integrating aQuantive and TellMe in terms of suggesting Yahoo would flow smoothly as well. Those two simply don’t compare. Those acquisitions were largely additive to Microsoft, bringing in capabilities that Microsoft didn’t have.
Yahoo is largely a duplicative acquisition, if it happens. Pick an area, Microsoft probably already has that feature or service. That means a hard choice of whether you keep running two, something that Yahoo itself has gone against as it has dropped its own duplicated services (Flickr over Yahoo Photos, for example). Alternatively, you go with one and risk alienating both users and generating internal strife, with the upside that perhaps you win new users.
For more on the Microsoft bid for Yahoo, also see our other coverage:
- Microsoft Makes $45 Billion Bid To Buy Yahoo
- Live Blogging Microsoft’s Bid For Yahoo Call
- Microsoft Call: "We Love The Yahoo Brand" [But Can The Deal Happen?]
- Q&A With Microsoft On Proposed Yahoo Purchase: 2+2 = #1
- Microsoft + Yahoo: Recapping Reactions