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November 06, 2006

Microsoft Plus Yahoo Could Beat Google

posted by MR WAVETHEORY at 11/06/2006 04:14:00 PM
Bill Wise, the CEO of Did-It (an SEM, aka search engine marketing firm) has an interesting take on why Microsoft Corporation (Nasdaq MSFT) plus Yahoo! Inc. (Nasdaq YHOO) could out Google Google. Should Google Inc. (Nasdaq GOOG) be scared? Bill points out that the big Purple plus Mr. Softie could be an interesting combination, by creating parity in search marketshare. I would add that another reason for combining is the complementary cultures. Microsoft would bring some interesting software engineering and research talent to Yahoo! which is very media centric, while Yahoo! would bring the Hollywood connections to a very engineering centric culture. The big question of course is who would run the place?

(Courtesy of MediaPost)
How Microhoo Could Beat Google


LAST WEEK, MERRILL LYNCH ANALYST Justin Post revived a suggestion that he had first brought up in June: Microsoft, Post argued, ought to buy Yahoo. Post pointed to reasons why Yahoo might be worth more than its current so-so earnings suggest; he also observed that a Yahoo purchase would let Microsoft gain serious search revenue, even before MSN AdCenter gets up to speed in growing its advertiser base. Obviously, the proposed Microhoo would be a threat to Google. Part of the reason is the major share of search that the new entity would gobble up. According to comScore numbers released in May, MSN and Yahoo hold a combined 41% of all search traffic, which is just shy of Google's 43%. But the threat from Microhoo would only partially come from search. The real threat to Google would be in Microhoo's ability to adapt to a continuously-converging media world--a world that MSN and Yahoo are ready for, but that Google still might not be as ready for as it needs to be.

All of this goes back to each business's core focus. For Google, everything is search; Yahoo and MSN, by contrast, work in many channels at once and look to integrate them. And because MSN and Yahoo are already thinking about integration now, they'll be far better prepared when integration really get underway.

You can see that philosophical divergence in the way each entity picks up search traffic. Google's name is synonymous with search, and it's the search engine itself that drives the bulk of Google's search traffic base. Yahoo also gets plenty of direct-to-search visitors; but an awful lot of Yahoo search traffic arrives off of search bars on Yahoo's enormous publisher network. The same is true for MSN and its publisher network-and MSN searchers even arrive via help buttons on Microsoft software. Google is popular for search in its own right; Yahoo and MSN Search owe much of their popularity to the way each business draws users from its enormous, diverse universe of user interfaces.

The different philosophies also come out in how each business applies search thinking to non-search channels. To take one example, consider search-influenced solutions for content/publisher sites. Google's big accomplishment here is AdSense, which syndicates actual search ads onto content pages. Yahoo's Publisher Network isn't so different from AdSense; but Yahoo has also bought into the Right Media Exchange--which will let the Yahoo publisher network sell display ads by auction, just as Yahoo already does for search ads. Meanwhile, MSN's publisher network is beginning to offer targeting on a level that's clearly inspired by the thinking behind AdCenter, MSN's super-targeted search platform.

These are very different approaches to how search might help publishers and content sites. Google's AdSense effectively recreates the world in the image of search. MSN and Yahoo, by contrast, truly integrate very different models, combining elements of text-based search advertising with image-based publisher advertising to make something new.

Which approach--Google's search-centric approach or MSN/Yahoo's integrative one--is better? A snapshot of today's online market would give a resounding win to Google, which pulls in roughly 25% of all online ad revenue, the vast majority of which comes from search. Google's win is strengthened by Yahoo's poor Q3 performance, especially given the fact that analysts agree that it's Yahoo publisher network, not its search network, that's giving Yahoo trouble.

But a present-day snapshot is misleading. That's because the information world of today is siloed in a way that tomorrow's world won't be. Full-length TV content that lives online, and iTunes for your cell phone, are just the beginning of the new convergence--and as channels continue to converge, the ability to work in many universes at once will be increasingly critical. Which is why the multichannel model, and not the search-only model, might just be the long-term winner.

There's even some indication that the tide's already turning. That indication comes from online video, which is effectively the merger of the Internet and TV. Just two days after the YouTube acquisition, an Oct. 11 Businessweek article ranked Google Video as the fifth-most popular video destination on the Web--with MSN Video as No. 4, and Yahoo Video at No. 1. Online video is the merger of different media models, and it's the integrators, not the dominators in search, who took the lead.

Of course, Google may have solved its video problems by purchasing YouTube. But if Google's video problems come from too narrow a focus on search, then one needs to wonder how many billion-dollar fixes Google can buy just to stay on top as the landscape shifts. Which is why if Google can't develop a more convergence-minded view of the world, it could face real trouble from a new Microhoo that's convergence-minded enough, and large enough, to win in Web 3.0.

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2 Comments:

Anonymous tomo said...

Mr Wave,

I like your blog. You should have more readers.

I think you're missing one piece of the puzzle on the yhoo and msft combo and that is salesforce.com. the sf.com apex provides a platform for an ecosystem that would enable a trading platform, if you will, for goods and services. I liken it to Marshall McCluhan and his coining the term, Global Village. At the end of the day what goog is building is going to be the most effecient delivery platform for advertisers to reach their audience. if goog has to give away internet access to do so, they will. they already are to some degree in mt view and would be in sf but that is what it is. it's the new fourth network. it'll be more efficient and personalized and provide realtime feedback to its advertising customers. goog is bldg out their network with datacenters, dark fiber, peering, internaitional sites, spending billions of dollars on this infrastructure because they want to make sure you never have to leave it or if you do they will be able to control where you leave and how you come back. they'll host your applications at work and your apps at home. they already do this. they'll be your connectivity provider no matter where you are...home, office, car, train, plane, etc. the youtube purchase and deals with the studios make sense for goog but the content owners are letting the fox in the chicken coup. as more and more content comes to youtube goog network, more users come, etc. bigger audience equals more eyeballs, etc except this audience can watch your show 24/7 and 365days a year. if you're show is on network tv it gets shown a maximum of 52 times per year and if it is a 30 minute show your chaces of maximizing your audience is 364 times as difficult on tv as over the internet. in a 24 hr period there are 48 possible 30min shows which is cool because they don't air 48 new episodes anyway. so that means that over the course of a year, you could get one full day of potential market reach over the television medium or you could get a potential 364 more chances if youre on goog. maybe at first they aren't mutually exclusive...at first.

pure speculation on my part. however, if you look at the team they've lined up, it kinda fits. kinda like @home network on steroids but real and no cable jackass' to get in the way.

the whole thing with the morons in sf is great for goog because it portrays them as such a do gooder not being able to do good and doesn't draw attention to what their really doing which should be drawing some regulatory attention because they are way bigger than at&t ever dreamed about being let alone accomplished. feds have their pants down.

take care.

plus when goog knows who you speak with, email with chat with, meet with, collaborate with, who your friends are, etc. they might, after their done predicting what you're insurance premium should be on your life policy, share that data with you.

1:01 AM  
Blogger Orchid Owl said...

I wish if i can share my tarot reading on Should Microsoft acquire Yahoo"?

Here is link:
http://readingtarotcard.blogspot.com/2007/05/should-microsoft-acquire-yahoo-tarot.html

8:24 AM  

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