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Inside the Microsoft-Yahoo Search Deal: An Advertiser's 'Cheat Sheet'

August 6, 2009 By Steve Baldwin
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What, exactly, are the details of the new Microsoft-Yahoo search deal? And how will the deal impact advertisers? I’ve composed this “cheat sheet” to help sift through some of the issues involved.

Deal details:

  • Microsoft’s technology provides search services for Yahoo.
  • Yahoo’s sales force sells search advertising to premium advertisers.
  • Microsoft pays Yahoo 88 percent revenue on search traffic generated through Yahoo sites.
  • If the partnership agreement gains government approval, the deal should close early next year.

More search engine competition
As a rule, healthy competition drives innovation and keeps pricing down in ways benefiting all players. Currently, all of the three largest search engines have wonderful things to offer. But with Microsoft's new Bing search engine and Yahoo representing nearly 30 percent of the search market today, the union of the two offers a very serious new search channel that's likely to spur new levels of competition among the engines — to everyone’s benefit.

Better search targeting with greater reach
From the beginning of its adCenter advertising platform, Microsoft has provided phenomenal targeting capabilities. Particularly noteworthy is its bid boosting capability that allows advertisers to spend more to reach searchers identified as members of a targeted group. And the more data Microsoft has access to, the better its targeting can be.

It isn’t clear whether Bing ultimately will apply Yahoo users’ data to allow “bid boosting” within Yahoo search results. But we can be certain that the wealth of data from the influx of Yahoo searchers will let Bing create a more intelligent, better targeted system overall. Applying this improved targeting across the massive Yahoo search audience means creating the best of both worlds: great targeting at a large scale.

More competitive targeting?
There's one downside to this targeting, however. It’s possible that, as Bing’s targeting improves, pricing and/or bid boosts could rise dramatically, reflecting the targeting improvements. Of course, advertisers would only pay more because they'd get better targeted results. But it also means advertisers may be forced to allocate more room in the budget for search.

More advertiser competition
One more potential negative effect to watch out for is greater overall competition within the Bing landscape. Until now, Bing’s small market share has made it something of a haven from the intense keyword competition within Google and Yahoo. But when all Yahoo advertisers transition to Bing, joining the advertisers already there, Bing will become a far more competitive place.

Of course, a very large portion of Bing search advertisers already run campaigns on Yahoo — meaning they’re already facing these “new” Bing advertisers within Yahoo. The only advertisers facing serious disruption on this front are those who work exclusively within Bing.

All in all, though, it seems the upside of the deal is very good for advertisers. That's why I’m really looking forward to next year.

Steve Baldwin is editor-in-chief at Didit, a Rockville Centre, N.Y.-based digital advertising agency specializing in paid search. Reach Steve at steve.baldwin@didit.com.


 

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COMMENTS

Most Recent Comments:
Mark - Posted on August 27, 2009
When the Bing integration is complete, will we still use the same Yahoo interface to manage our ads that appear against Yahoo searches or will everyone be converted to adCenter?
Steve Baldwin - Posted on August 27, 2009
Thanks for you question, Mark. The way things stand now, it looks like everyone will be converted over to AdCenter (assuming the deal goes through). The official Microsoft-Yahoo announcement says that, should the deal go through, "self-serve advertising for both companies will be fulfilled by Microsoft's AdCenter platform, and prices for all search ads will continue to be set by AdCenter's automated auction process."