Think You’re Ready For The Microsoft-Yahoo Search Alliance? Maybe Not

We’re only one month away from the first phase of the Microsoft—Yahoo search alliance. Are you ready? By now, there have been numerous opinions published on the upcoming alliance, but not much to set tactical expectations. Some experts such as Kevin Lee of and Bryan Weiner of 360i would claim that there won’t be any impact to advertisers; others such as Chris Copeland of GroupM Search and Kevin Ryan of Motivity Marketing might beg to differ.

Both Microsoft and Yahoo have been unusually coy. Most advertisers and agencies might find that their sales teams have tried to provide as much information as possible to set appropriate expectations, yet even they aren’t privy to details known only to a select few. While the joint effort to purposely over-communicate is clear, greater transparency would be helpful. And if agencies are truly partners to Microsoft and Yahoo in this transition, then the added information should in turn help provide them with the feedback needed to be successful.

Not surprisingly, many questions remain. So, what should you be prepared for?

There is no early adopter advantage. You might have heard already that all phases of the transition will impact advertisers universally and simultaneously. No advertiser will have a lead advantage. Assuming that each phase is executed smoothly, Yahoo search could be entirely powered by Bing as early as September, which leaves little time for delays especially if the transition needs to be complete before the holidays. On the contrary, if delays push the transition into October, the two engines could opt to postpone further development to Spring 2011. Will Yahoo—and more importantly Microsoft—be ready?

Microsoft still has work to do. As of late June, Microsoft announced the first of two preparatory adCenter enhancements for the transition. Advertisers will see new performance and editorial dashboards. Integral to the transition is an enhanced import process as well. While helpful, these features should have rolled out ages ago. All search marketers will agree that Microsoft’s second enhancement must improve negative keyword usability and allow advertisers to exclude search partners. Adopting Yahoo’s domain blocking tool will suffice. Microsoft should take note of Yahoo’s painful lesson from expanding its search network with low quality partners and unraveling its keyword match driver. Assuming that Microsoft does not provide this feature in the second enhancement, advertisers would be wise to pay close attention to referral traffic sources as soon as Bing syndicates a larger share of Yahoo Search traffic.

Competition among advertisers will increase. More importantly, once Yahoo search is fully syndicated into MSN adCenter, advertisers should brace for a potential CPC increase. The economics are simple: as both networks converge, a combined Microsoft and Yahoo search marketplace will drive a substantial number of new advertisers to Microsoft and—to a lesser extent—Yahoo. The result of this will be an increase in competition on the SERP. In a Quality Score world, this translates to increased bid pressure and effectively higher CPCs.

Using a competitive keyword report from AdGooroo, I looked at three verticals of key interest to our clients. I examined a few competitive generic terms that drive the greatest traffic and spend. The AdGooroo report identified all advertisers targeting the selected terms by search engine. Accounting for a converged marketplace, the Yahoo and Bing lists were cross-checked for new unique advertisers respectively. Under “Advertiser Base Change,” the resulting increase in advertisers for each network is listed. Based on a weighted average accounting for the variance in scale between the search networks as well as the anticipated spending capacity of the new advertisers, the resulting bid pressure was estimated. Given some inaccuracies in identifying “new” advertisers by AdGooroo and considerations for advertiser size, the estimated bid pressure impact has been manually adjusted.


We can fairly accurately conclude that some verticals will be impacted more than others. A liberal assessment based on this limited sample might hold that CPC could increase from 20% to 40%. The onset of higher costs may not occur immediately as some advertisers may respond slowly to the transition. A few may even sit out until “the dust settles.”

It’s not all gloom and doom. We should also consider some of the opportunities that will emerge from the Microsoft and Yahoo search alliance. Let’s not forget that we will be abandoning the inefficiencies of Yahoo Panama’s loathed keyword match driver. At last, advertisers will be able to truly target a keyword by “exact match” without the worry for the ever-problematic canonical duplicates. Overall, there will certainly be an efficiency gain for all experienced advertisers that can effectively leverage MSN adCenter’s features to their advantage. Smaller, potentially less savvy advertisers will benefit from additional distribution. Conversely, some larger advertisers may lose some their competitive advantage over small advertisers through greater ease of targeting and optimization on MSN adCenter.

Assuming the marketplace stabilizes after a few months, the net result of increased competition and gained efficiency probably won’t cancel each other out. Across the industry, it may be safe for advertisers to account for something in the area of net 5% to 15% higher CPC, though advertisers would be best to determine impact to their own business. While still uncertain, it’s best to take a cautionary and reactive approach. Good advice may be to blend historical Yahoo and MSN performance reports to establish a baseline for what is to come.

The alliance has had a negative impact on innovation. Over the course of the last year since Microsoft and Yahoo agreed to the search alliance, the industry has faced a few disappointments. First, Yahoo disbanded all feed-based “submit” programs in January 2010. Yahoo’s abandonment of Search Submit Pro brought an end to paid inclusion, which constituted a philosophical shift to what most might interpret to appease Microsoft. Secondly, Microsoft hastily announced in early June 2010 that Bing Cashback would be discontinued, which ended what most advertisers see as a valuable acquisition and loyalty program. Couldn’t Microsoft have tweaked the Cashback business model to put the program on track? This cut and run strategy risks undermining trust as well as treasured relations between these publishers and their trusted advertisers and agencies. I believe that what we’ve already seen is the negative impact of the search alliance on innovation. Is this really how “Microhoo” will challenge Google? Hopefully not.

To be fair to Microsoft and Yahoo business interests, the alliance could allow both publishers to focus more on their key strengths. Yahoo would disband development on its “Panama” platform and save on exorbitant engineering costs. Yahoo could focus more on developing content for its portal. Microsoft would be able to support potentially thousands of new advertisers with an arguably better advertising platform and countless years of customer support experience.

As disruptive as the Microsoft—Yahoo search alliance may seem, it constitutes an unprecedented and admittedly exciting step in search marketing. How the end user perceives a revamped Yahoo search and empowered Bing search engine will determine whether Google’s market dominance can truly be challenged. It leaves me to wonder: how well will Yahoo users receive the simplified form of Bing search results? Will Yahoo be able to effectively brand itself in search?

The lack of choice for users may not be apparent at first glance. Unlike for users, the alliance eliminates a more tangible “choice” for marketers who could benefit in the long-term with a single, formidable platform and more effective tools to rival Google AdWords.

Opinions expressed in the article are those of the guest author and not necessarily Search Engine Land.

Related Topics: Channel: Industry | Features: Analysis | Microsoft & Yahoo Search Deal


About The Author: is a Sr. Group Search Director at MediaCom, a WPP/GroupM agency in New York, NY. He is responsible for top-level paid search relationships between MediaCom and its clients. He can be reached on LinkedIn at: and Twitter @mikekujanek.

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  • linhlanh

    Having followed the alliance closely, I’ve noticed the average CPC has been trending upward, indeed. However, what you are saying about “bid pressure” is more from the advertisers’ side of the story. Without actual change of search behaviors from search-engine users. Smaller and less sophisticated advertisers will not be able to stick around for long. Some may be better off not spending until everything stabilizes. Great article otherwise :)

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