European ad buyers welcome the Yahoo-Microsoft (NSDQ: MSFT) search-and-ads deal as enhancing competition - but the mountain the pair have to climb there is even higher. In paid search, Google (NSDQ: GOOG) has 78 percent of US ads, but more like 92 percent in western Europe, Ballmer acknowledged in Wednesday’s conference call.
The new partners’ share of US search queries (Google 63.2 percent, Yahoo (NSDQ: YHOO) 17.2 percent, Microsoft 9.40 percent - Nielsen, May ‘09) looks almost respectable compared with that in Europe, where Google enjoys a whopping 83.89 percent of UK searches (Yahoo 5.43 percent, Microsoft 3.28 percent - Nielsen, June ‘09).
Combining the two still gives MicroHoo only a paltry 8.71 percent of UK searches, and even less elsewhere on the continent. That’s not enough to challenge Google on search itself, and may not be enough to realise significant gains from what’s left of the paid search market to fight over.
—An antidote to Google?: Rebecca Jennings, Forrester’s principal London analyst says: “This deal should allow Yahoo! to give up its drive to to beat Google, and concentrate on the elements it does do better - display media and social media - devolving the competition and the significant investment involved off to Microsoft ...
“While this won’t immediately worry Google ... this will create a more viable second-string player in all markets, giving interactive marketers a significant, credible alternative/additional outlet for their search spend, or at least a better incentive to run trials outside of Google ... This deal should help convince even the most stubborn budget-holder that spreading their money outside of Google would be beneficial.”
—‘Impact will be minimal’: But Lyndsay Menzies, COO of Bigmouthmedia, one of Europe’s big search marketing agencies, says: “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. Although the impact in the UK will be minimal.
The firm’s search head Andrew Girdwood: “We will have another credible search engine to consider for paid search budgets. That may result in some instability as bid management platforms adapt to cope with the new landscape, but it will help keep cost-per-click prices down. But if Bing is only going to supply Yahoo with organic results, then it still means Yahoo is out of the search game. Theyll not be developing their search engine, are unlikely to return to it and will in essence become an ad management platform - the long-term effects of which remain to be seen.
Martin McNulty, director of search marketer Trafficbroker: “For the man in the street this deal will have very little impact. Neither Bing nor Yahoo offers anything over and above what Google does, and despite Yahoo now agreeing to show its users Bing results, how many people, realistically, will notice this or feel they are being better served? From an advertiser’s perspective, the ramifications of this deal are potentially much worse. Bings platform for search advertisers is vastly inferior to tat of Yahoo!, so consolidating Bing and Yahoo! on a single platform will reinforce the inferior experience compared to Google and could, in the long term, severely damage future revenues.”
—Paid search is in a lull: Search took 59.3 percent of UK online ad spend in 2008, The Internet Advertising Bureau (IAB) UK says, but no prizes for guessing who took the majority of that. Still the most resilient advertising category, the rate of growth has nevertheless tailed off in the downturn - eMarketer reckons UK search ad spend will grow just 4.9 percent in 2009—Yahoo and Microsoft are teaming at the bottom of this market, but at least a recovery is expected.
IAB UK, “run for the leading media owners and agencies in the UK internet industry”, refused even to comment on the deal, saying it must remain impartial on the activities of its members, which include Microsoft and Yahoo.
—Microsoft has a bad name in Brussels: Regulatory scrutiny will typically be closer from the European Commission than the US Justice Department, going on past cases. But none will yet be taken until the pair ask the commission. An EC spokesperson tells us: “The commission keeps this sector, as others, under review. It’s up to the two companies to file the notification. The commission has not been informed about the details of the transaction.”
Since the pair acknowledge the deal is “subject to regulatory review”, some kind of EC inquiry is a certainty. For Europe’s competition commission Neelie Kroes, this will be take two - coming 12 months after she began scrutinising the Yahoo-Google deal that never was. But Kroes is also an old Microsoft foe who has fined Ballmer’s company over 1.5 billion in antitrust fees since 2004 - and more penalties are looming after she provisionally concluded tying Internet Explorer to Windows is yet another rule-breaker.
By Robert Andrews