May 16 2007

Google v Microsoft/Yahoo

US software company Net Applications looks at the global search market and asks whether Google would welcome a Microsoft/Yahoo merger.

([Ed] What do you think of this US take on the search market? And what about Ask.com? Will its current marketing efforts to prove itself as 'the other search engine' propel it to the number 2 slot in the UK market?)

Press release follows: The Search Engine short term battle for second place (Google US has the top spot locked for the foreseeable future) between Yahoo and Google UK has Yahoo bouncing back to the number 2 spot with 9.87% market share compared to 9.49% for March. Google UK dips to 9.28% market share after 3 straight months of hovering above 10%.

But, the long term battle is heating up between Microsoft, Yahoo and Google. So, is it the news that Microsoft and Yahoo are considering a merger to better compete against Google that has more people going back to Yahoo? When that deal is analyzed, there are distinct potential advantages as well as potential disadvantages to consider:

To analyze the future potential for the big 3 in internet traffic, we have to start with understanding the present. The numbers show that between Microsoft, Yahoo and Google, Microsoft has the most traffic, Yahoo has the 2nd most traffic but keeps visitors the longest, and Google is 3rd in traffic but makes the most money off of that traffic. So, what's more likely to happen?

Can Microsoft increase its stickiness and online profitability? The internet revolves around search and advertising. So, can Microsoft catch up to Google better by continuing to enhance its own MSN search, or is it quicker and easier to buy Yahoo with its new Panama search/advertising platform that is reportedly competitive with Google's technology? Microsoft will try to merge with/buy Yahoo, and come up with a Live vs. MSN strategy that includes online versions of its Office tools. They have the operating systems and Office cash cows for now, but competitors are developing better and better offers.

Can Yahoo increase its traffic and profitability? Yahoo is still in an extremely strong position. They don't need Microsoft as much as Microsoft needs them. Website stickiness is Yahoo's strength, and that can sometimes be underestimated. Yahoo still has the best online content of the big 3. Merging with Microsoft would add an enormous amount of traffic to Yahoo's search and advertising platform, Panama (assuming the merged companies would adopt that system for both). But, Yahoo could make a comeback in search without Microsoft. And, the merger itself may become enough of a distraction to negate any benefits in additional traffic.

Can Google increase its traffic and stickiness? That's what Google's trying to do with purchases like Youtube. But, the copyright lawsuits from that and the potential competition and privacy concerns from their recent purchase of DoubleClick may force Google to hire more lawyers than software engineers. Google may actually welcome a Microsoft Yahoo merger because neither company is accustomed to big mergers and the time it will take to gain any benefits.

Emma Herrod