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Microsoft-Yahoo! deal draws mixed reviews

by Staff Writers
Washington (AFP) July 29, 2009
Microsoft's tie-up with Yahoo! gives the companies a larger share of the Web search market but analysts are divided on how much it will actually deliver in making inroads against powerhouse Google.

Google is the overwhelming leader in a Web search and advertising market which the research firm Forrester estimates will grow by 15 percent a year to more than 30 billion dollars in 2014 in the United States alone.

With their partnership announced on Wednesday, software giant Microsoft and Internet portal Yahoo! are hoping to steal market share -- and advertising dollars -- from the company that has come to define Web search.

Forrester analyst Rebecca Jennings was among those who said the agreement, under which Yahoo! will use Microsoft's new Bing search engine and handle Web ad sales, would boost both companies.

"This deal should help convince even the most stubborn budget-holder that spreading their money outside of Google would be beneficial," she said.

"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," Jennings said.

Analyst Rob Enderle of Silicon Valley's Enderle Group agreed, saying that many advertisers were "nervous" about Google's dominance and "would just as soon not do business with Google."

Google enjoys a 65 percent share of the lucrative search market according to the latest figures from research firm Comscore, followed by Yahoo! with 19.6 percent and Microsoft with 8.4 percent.

Enderle said a combined Microsoft-Yahoo! "gives them enough of a share to be a player." "At eight percent you're not really a player. You step up to around 30 percent and suddenly you're an alternative," he said.

He said the deal itself "plays to both companies' strengths."

"It also eliminates a problem for Yahoo! which is 'How to come up with the massive amount of money in what is now a technology race on search?'" he said. "Because they don't have it.

"This allows them to focus their resources," Enderle said.

Chief executive Carol Bartz said the deal will allow Yahoo! to "focus on the things we do best -- being the center of people's lives online with properties like our homepage, mail, finance, news, sports, entertainment, mobile, etc."

Danny Sullivan, editor-in-chief of, a website which covers the search industry, said the agreement was a "bargain" for Microsoft, which offered 47.5 billion dollars last year in a takeover bid for Yahoo!

He said the deal had an "incredible upside" for the software giant based in Redmond, Washington, but "there's a lot of questions up in the air for Yahoo!"

"The whole thing has left their whole future very clouded," Sullivan said.

"Yahoo!'s giving up on search and they're not getting any big payment to do so," he said. "Just look at what they were promised last year from Microsoft."

In terms of chipping away against Google's lead in search, Sullivan said: "I don't know that this changes anything. This deal doesn't make Yahoo! search any stronger than it was already. It doesn't make Microsoft stronger than it was.

"For advertisers to really feel that they have made a difference against Google they need the actual number of searches to increase," he said.

The verdict of the markets was harsh on Wednesday.

Yahoo! shares shed 12.08 percent on Wall Street to close at 15.14 dollars while Microsoft gained 1.41 percent to finish at 23.80 dollars.

Google lost 0.82 percent to close at 436.24 dollars.

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Yahoo!, Microsoft in Web search, ad partnership
Washington (AFP) July 29, 2009
Yahoo! and Microsoft, after months of negotiations, unveiled a 10-year Web search and advertising partnership on Wednesday that sets the stage for a joint offensive against Internet titan Google. Under the no-cash deal, Yahoo! will use Microsoft's new Bing search engine on its own sites while Yahoo! will provide the exclusive global sales force for the companies' premium search advertisers. ... read more

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