SEO News
Search

Could the Microsoft-Yahoo Deal Create a Global Domino Effect?

atkinskrueger-andy
by , Comments

Imagine that last week you were attending a strategy meeting at the headquarters of the world's third-largest search engine, Baidu, aware that you were sitting on a 12.9 percent global share of the search engine market (according to ComScore figures from July 2008). Just above you sits Yahoo on 14.6 percent, and just below you Microsoft on 3.6 percent. But your big worry is Google, with a huge 64.1 percent of global share, and a stated aim to eat you alive in your domestic market, where you're otherwise in a very strong leadership position .

Financially, you're very strong, but that depends on keeping the Chinese Google dogs at bay. You have aspirations to become a more global player, including expanding your existing operation in Japan, but the danger remains losing ground to Google at home, and becoming distracted through developing search technologies which can cope with western character sets and languages, when your strength is Asiatic languages.

So choosing to partner with other engines – particularly to gain sales from western markets – would make sense. But who would you partner with?

Clearly a partnership with Google wouldn't be a cool idea, as they're already enemy number one. You could partner with Yahoo – but they're actually your number one competitor in Japan. And by the time you get to a 3.6 percent global share, there's little to be gained with Microsoft other than small local deals. Additionally, Yahoo seems to be in trouble and is probably going to end up partnering with Google (jeepers!!) or Microsoft.

The New World Order of Search

That was last week. Now the world order has changed -- so back to the strategy room. Instead of several potential partners and competitors, Baidu now faces Google with 64.1 percent and Microsoft with roughly 18.2 percent. After that, it's clear blue water before anyone else is even on the horizon.

There's no longer any risk of Yahoo falling into the Google camp, and Microsoft represents little threat to Baidu in China or anywhere significant in the far east – with the exception of that Yahoo number one position in Japan as well as Taiwan and Hong Kong – but now that's just part of a global picture.

In addition, both Yahoo China and Yahoo Japan appear not to be part of the Microsoft deal anyway – at least it's not yet clear. Yahoo China is run by Alibaba, which is 40-percent owned by Yahoo – so this will probably not be part of the Microsoft project anyway. Yahoo Japan is 42-percent owned and majority-controlled by Softbank – and there is no clear statement yet as to whose results will start appearing in Bing or who will share the revenue.

The most interesting aspect is that both Baidu AND Microsoft have one single common enemy -- Google!

The Enemy of My Enemy...

Baidu's biggest problem in not having a truly global presence in a sense affects its revenues at home. Comparison between click volumes and cost per click values in China show that Google clicks often cost more to buy even though the volumes are significantly less than those of Baidu's.

The reason has to do with the way the auction model works and access: it's easy to turn on campaigns for China in the Google Adwords interface – you don't even need to speak Chinese to do it (though you'll need someone to produce Chinese keywords and creatives for you). To run a campaign on Baidu is currently difficult unless you are a Chinese-speaker. As a result, the auction model tends to help inflate the cost of Google's clicks -- not Baidu's.

If Baidu could justify a global sales force, it could significantly improve its Chinese performance – and help to stave off the Google threat. But that would be a mammoth undertaking that would be difficult to cost-justify. Now there is the Microsoft option. Interestingly, there have been a number of contacts between Baidu and Microsoft.

Much of Bing's programming was developed in China, as was the AdCenter advertising platform. Baidu and Microsoft people already know each other. Indeed, the Baidu team signed a local deal to power Microsoft's Chinese search sites with ads from the Baidu system in December 2006 – so this relationship already has a long history.

So what would make sense would be signing up to the global sales activity that Yahoo is to organize for Microsoft – once any legislative hurdles have been jumped – and to deepen that original partnership with Microsoft. This would help Microsoft and Baidu.

The lack of clarity over Yahoo Japan may even have been factored in here; it could well be in Baidu and Microsoft's interests to leave Yahoo Japan well alone on the Panana system and using Yahoo search technology – not Bing's.

What's particularly intriguing about this whole scenario is that you could re-tell the same story replacing Baidu with Yandex and Beijing for Moscow. Seznam in the Czech Republic could be another candidate. Al Arabya.net another.

If this thinking spreads through international search engine board rooms, it is entirely feasible that the dominoes could fall and that a global anti-Google alliance could be the result. A partnership combining Microsoft + Yahoo + Baidu + Yandex + Seznam would certainly create an adrenalin rush in Mountain View.

These are interesting times and we'll certainly be keeping an eye on the wobbling dominoes.


The Original Search Marketing Event is Back!
SES DenverSES Denver (Oct 16) offers an intense day of learning all the critical aspects of search engine optimization (SEO) and paid search advertising (PPC). The mission of SES remains the same as it did from the start - to help you master being found on search engines. Register today!

Recommend this story

comments powered by Disqus