In case you failed to check into reality over the last two days you’ll have noticed that Microsoft merged with Yahoo in some kind of confusing mega deal. Microsoft’s Bing will now provide the search power for all Yahoo search queries and in return Yahoo will provide advertisements for both Yahoo and Bing. Microsoft will give Yahoo an 88% cut of ad sales and revenue generated for the first five years and in return Microsoft get to increase their market share of search, putting both of the companies in a better position to take on the cause of this entire mess, Google.
Got that?
Apparently Wall Street didn’t. The day after the deal was announced Yahoo’s share prices took an awe inspiring tumble losing billions of dollars in value overnight. Do the investors think that Yahoo will disappear into Microsoft like molten metal into t-1000?
Steve Ballmer quickly looked to spin Yahoo’s crash in value by declaring that investors didn’t “get” the deal. “Nobody gets it” he said, and he’d be right, I have a hard time understanding the labyrinth of possibilities that is the Bing-Yahoo deal myself, and I’m investing nothing in anyone.
You might forgive the money throwers over at Wall Street for failing to understand the deal, based on their less than inspiring track record I wouldn’t be surprised if they failed to understand what day of the week it is. The reactions worth noting are those from the digital industries, so how are they responding?
Initially, there seems to be a warm response. The general feeling is that any increase in competition to the gargantuan market share Google hold can only be a positive thing. Bigmouth media were a happy bunch saying “given the alarming dominance that Google has held over the market for so long, the prospect of a serious challenge to their position is good news for everyone,” a sentiment repeated by many working in digital marketing and advertising.
Google haven’t stepped on too many toes during their decade long dominance in the market, but it’s easy to see why people have been concerned about their share of the pie. In the US, Microsoft and Yahoo have a combined market search market share of 28%, compared with Google’s 65%. In Europe the situation is even more significantly skewed in favour of the Google juggernaut. So much so that in Britain it’s not far off being a complete monopoly. According to the latest figures from Hitwise, Google had 90.6% share of the search market during June, Yahoo had 3.9% and Bing 2.4%. If there’s a monopolisation problem anywhere, it’s in Europe. If Bing can claw back 30% of the market share then they really are a serious contender to Google.
Add to this the recent findings from Chitika which suggest that the click through rate from Bing traffic is much better than Google’s – as much as 50% better – and suddenly, the Goliath of the marketing world finds itself staring at it’s David whose sling is cocked and loaded.
It’s an interesting state of affairs when Steve Ballmer can proclaim, without any degree of irony, that to increase competition with Google, their rival competitor has to be consolidated “to make a stronger number two”. The logic at work surely doesn’t apply in any other industry. The mighty bald one also declared that “it’s good news for consumers” though from where I’m sitting, there’s going to be very little change for the foreseeable future. Go over to yahoo.com and you’ll see a “powered by Bing” notice, and that’s about it. So what’s the cultural fallout from those “consumers” that Ballmer talks about?
The mashups were surely to be expected, but the overall tone seems to suggest a fear that Microsoft will bring the blue screen of death to your search listings. The community over at Flickr aren’t best pleased, choosing to use the blonde bombshell Chris Crocker to make their position staggeringly clear.
Well while the Flickr crew cry into their hands fearing their beloved photo sharing platform has been compromised, Steve Ballmer tells us “I feel better about where the company is, on a number of key dimensions, than I have for a long time” which means he feels better than this:
If he’s feeling better than that, I can’t imagine this deal is likely to turn sour any time soon. If Bing increase their market share by 10% I think Ballmer is going to put himself in a coma.
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