May 11, 2006
Within the last week there has been a lot of buzz about the online search businesses of the three search engine giants: Google, Yahoo! and MSN. We anticipated some of the buzz — MSN announced its US launch of AdCenter at its Strategic Account Summit in Redmond beginning 5/2; and Yahoo! announced a new platform and set of services for its advertisers on Monday. But last week a surprise WSJ article generated quite a stir. Here’s the excerpt that got everyone talking:
One faction within Microsoft Corp. is promoting a bold strategy in the company’s battle with Google Inc: Join forces with Yahoo Inc.
That would be a major departure for Microsoft, the software maker that is legendary for toiling on its own until it captures a new market. However, people familiar with the situation say that Microsoft has considered the idea of acquiring a stake in Yahoo, and that the two companies have discussed possible options over the course of the past year.
A Microsoft-Yahoo combination could merge complementary strengths. To succeed in Internet-search advertising — the business driving Google’s growth — a competitor needs three core elements: strong technology, a mass of consumers and a universe of different advertisers. Microsoft is spending untold hundreds of millions of dollars on the technology piece, but it doesn’t yet have enough consumers using its MSN service to entice the needed advertisers.
A tie-up with Yahoo could address part of that problem. It has more than 100 million people visiting its site a month, making it the most popular Web site in the U.S.So far it is losing the race to Google when it comes to the technology for matching ads to consumer search queries, though it plans to unveil an upgrade to its system this month.
I’ve heard no such chatter from either MSN or Yahoo! and actually think the whole idea is hogwash. While Google definitely has the largest share of consumer searches; I don’t feel like Yahoo! and MSN are “playing catch up” at all. There is plenty of room in the search market for all three. In fact, any one could be a “leader” depending on what evaluation criteria you use. Google has the most consumer searches and largest publisher network. Yahoo! has the most information about its customers and the most Web 2.0 sites (like Flickr and del.ic.ious). And MSN has the greatest ability to extend its search and media capabilities onto the desktop. Additionally, the smartest advertisers will optimize their bids across all three of these engines – and potentially many smaller engines, or niche and vertical ones – as they think strategically about who their customers are and what search engines they use at different points in their purchase process.
What’s interesting to me about both the MSN and Yahoo! announcements is not how the two platforms compare to each other or to Google. But rather the fact that these three search engines – media companies – are now providing robust sets of marketing services to their advertisers. Services which in a traditional environment would be expected of agencies, not media partners. I think we’ll start to see more of this in the offline space as online players expand into traditional media. And as traditional players – like television networks and cable companies – start competing for advertiser dollars by making it as easy as possible to buy their addressable ads or integrate television ads into their programming delivered online.