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TMFEditorsDesk (< 20)

Microhoo's Shotgun Marriage Over- Now Comes the Awkward First Wedding Dance



July 29, 2009 – Comments (3) | RELATED TICKERS: GOOGL , MSFT , YHOO

After almost a year and a half of back of speculation, it looks like Yahoo and Microsoft have finally tied the knot. (Link provides a timeline of the events.)

While not the full buyout that Microsoft had initially angled for, it does provide a 10-year partnership that makes Bing the default search on Yahoo's site and gives Yahoo the right to handle sales of search ads for both companies.

Early this morning most pundits have this scored as advantage Microsoft; their stock is up slightly while Yahoo is tanking in early trading.

Personally, I've got mixed feeling on the whole affair. I've long thought Microsoft needed to stop focusing on shiny objects like search, its new retail stores, and the Zune. Instead, Microsoft should have focused their attention on areas more complementary to its existing expertise (imagine if all the search resources had been poured into Virtualization, shareholders would be much happier right now.) 

That being said, Bing is Microsoft's first search product that really made people stand up and say, "Hey, finally something that's different than Google... And maybe even a little bit better." So, even though I have about as much confidence in Microsoft beating Google as I have in John Daly being able to run a half-mile without cardiac arrest, I think the time to take a shot at a game-changing deal like this is now.

Fairly soon Google will innovate and Bing will lose its early luster. Put in that light, it's a pretty cagey deal on Microsoft's part to lock in Yahoo by leveraging early positive press reports on Bing. Additionally, Yahoo's main page is still a traffic monster, pulling in 300 million unique users a month. If the two companies can start getting people to do more searching off Yahoo's portal too, they'll be able to put a real dent in Google's stranglehold on search.

Of course, that's just my .02 on the sordid affair. Drop a line below and let us know what you think of this morning's news.


-- Eric

3 Comments – Post Your Own

#1) On July 29, 2009 at 10:16 AM, TMFEditorsDesk (< 20) wrote:

Call me crazy, but I kinda like the deal for both Microsoft and Yahoo!...given their positions as distant competitors to Google's search and ad placement. 

For Microsoft, it gets almost 30% of the search market (to Google's 65%). While I agree with Eric that the Zune and the retail stores are distractions, I'm a little more forgiving in Microsoft's quest for search's at least more relevant than some of Google's offshoots. Still, if I had to put money on who would dominate search ten years from now, I'd go 1) Google 2) someone in his mother's basement 3) Microsoft.

For Yahoo!, it ditches a losing search effort (there's something noble in admitting defeat and focusing on what you do well...yes, I'm arguing both sides with my defenses of Microsoft and Yahoo!) and focuses on its strength as a portal...including it's recent site redesign (unlike others, I like the left navigation that includes competing sites).

-Anand (owns shares in Microsoft)

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#2) On July 29, 2009 at 10:27 AM, TMFRhino (99.23) wrote:

I haven't done a bunch of reading on the event yet (despite my pontificating above), however I'll be curious how this affects the vibe within Yahoo. From my personal experience, Yahoo software engineers considered themselves on equal footing with Microsoft and Google developers. The company used to develop some really complex programs internally, so I'd say the feeling was justified.

Now however, Yahoo's essentially outsourcing the development work on search. This will mean some layoffs, and also shift Yahoo away from developing great products and more into a sales company.

Looks like they'll need to run a pretty tight ship to keep morale up over the coming months.

-- Eric

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#3) On July 29, 2009 at 10:35 AM, Mary953 (85.34) wrote:

does this mean that this time when I delete Yahoo from my computer settings and dump the toolbar, it will not find a crack in the defenses to come crawling back in and hijack my computer again?  It gets old real fast.

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