Yesterday was the major league baseball trade deadline and lots of teams made big deals and took huge gambles for short-term gain, while possibly risking the future in the form of younger, cheaper, but unproven talent. Microsoft and Yahoo! also made a trade of sorts when they signed an historic agreement this week, a move I consider mostly mostly positive, but like the baseball deals, it could take years to figure out winners and losers. One thing is clear, however, I find the length of the agreement, and the decision to use Bing as Yahoo's underlying search engine, a huge gamble on search technology that was only released in June.
Takes Two to Tango
Microsoft and Yahoo! made a smart move when they combined their search offerings earlier this week. I've always said, the two are far more powerful together than they would ever be apart, and by joining ad sales forces and advertising technologies, they could act as a powerful check against Google's Search market dominance. The search market is now a much more competitive place, and that almost always bodes well for the consumer, but the devil, as they say is in the details, and the details have some questionable elements.
The most curious part of the agreement to me was to go with Bing, which has proven popular out of the gate, but has not been around long enough to measure even one quarter's market share. Yahoo! on the other hand has consistently delivered 20 percent market share in recent search engine market share reports. It seems to me that although Bing is shiny and pretty and new, it still has a lot to prove. I'm guessing that Microsoft insisted on using Bing as the underlying search technology or there would have been no deal.
10 Years Is a Long Time
You have to wonder why they felt they had to go this long on the deal. As TechCrunch pointed out, 10 years is an eternity in technology terms, and that's especially true when you consider that Bing is only about 2 months old. Any way you slice it, this deal worked out well for Microsoft. They have Bing running on two search engines for 10 years. It seems clear that Yahoo! didn't have a heck a lot of leverage in the negotiations.
Regardless, Yahoo! remains an independent company (at least for now), and one that is much stronger with Microsoft's backing than it would ever have been on its own. But just as the Phillies or the Red Sox may regret what they gave away at some point for short-term stability in 2009, these two companies could look back and wonder what could have been, but for now at least, the deal is looking good and Google has to be looking over its shoulder. And that's a good thing.