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What Would a Yahoo-Microsoft Merger Look Like? Part 2

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The search world has been abuzz for the last week, since Microsoft launched a takeover bid of Yahoo. The $44 billion deal would reshape the search engine marketing arena, teaming the number two and three players into a solid number 2. But if the deal does go through, there will be plenty of integration issues.

We asked several search marketers for their opinions about a future that includes a combined Microsoft-Yahoo search engine. Specifically, we asked about:
1. The benefits of combining Panama and adCenter, or replacing one with the other.
2. The best way to combine the search and directories of each company.
3. The benefits Microsoft would see by adding Yahoo's social networking properties, or how a Microsoft acquisition might affect those properties?

We shared part one yesterday, and now have parts two and three today.

Andy Atkins-Krüger, managing director, WebCertain

The idea of Microsoft acquiring Yahoo has a lot of appeal in that I would like to see stronger competition in the search space. It is not healthy to have one company dominate – and in some countries in which we work Google has a virtual monopoly of pay per click advertising.

The trick for Microsoft is to add the two audiences together and I don't care what approach they use to achieve this as such – I can't see how that's going to easy. If they merge or lose one of the brands, they'll certainly lose. To gain, they have to keep all Yahoo brands and all Microsoft brands and improve the efficiency of the supporting technologies such as panama or AdCenter.

And they have to have one advertising interface, either Panama or AdCenter (but it's likely to be AdCenter, realistically). I'd also like to see them use this as a springboard to compete with Google in many more countries than they do now. One reason Google is so powerful is that in many places – they are on there own anyway – or at least there's no localised version.

Anne Kennedy, managing partner, Beyond Ink

Here come Coke and Pepsi. Will Ask be the "un-cola"? This is not entirely a surprise, given Yahoo's assets and market share, and Microsoft's bumpy efforts to build a functioning search presence. Clearly buying rather than rolling their own will give Microsoft the search share, and additional search revenues that have so far proved elusive.

Does the new combined market share make paid inclusion more attractive for SEO?

Avi Wilensky, president of Promediacorp

I think that search industry moving from a triopoly to a duopoly will ultimately be bad for the consumer. Any market dominated by two players inherently cannot be good for the consumer. Oligopolies always create risks or collusion, and create barriers of entry for smaller players. This means as advertisers, we are likely to see prices rise, and as publishers, our share of payouts decrease.

Emerging search engines such as Wikia or Mahalo will further struggle to become viable players in the marketplace. The crowding out of new and potentially better search engines means that smaller firms will be less inclined to innovate and attempt to enter the search space. Again, bad for the consumer – since it creates a scenario where the big boys are likely to dominate the space for an even longer time.

I think that Microsoft and Yahoo becoming one will force the beast to innovate from within. Innovation in search is costly, as it relies heavily on massive investments in human capital, technology, branding, and advertising expenditures. Microsoft and Yahoo evolving into one single firm will be able to take advantage of economies of scale – where these costly expenditures necessary to compete in the search space will become more attainable.

Microsoft's continuous failure to innovate and improve their search products cannot be resolved by simply shelling out their profits from their stronghold on the operating system market to purchase a "possible solution." If we can't fix it – buy it – seems to be what's going on here.

Andrew Shotland, SEO, local search & web strategy consultant, Local SEO Guide

I think one of the big Yellow Pages companies should step in and up the bid. These companies are being forced into becoming more like local ad sales agents because they have lost the battle for consumers. Yahoo has extensive small biz assets, great consumer traffic and what used to be a state of the art local search service. I'm not sure how the execution would go, but in theory this could be a good move, not to mention an exciting twist to the story.

Melissa Mackey, online marketing manager, Fluency Media

AdCenter vs. Panama: I'd like to see both PPC programs rolled into Panama. The Panama interface overall is much faster and easier to use, and offers a lot of robust features that adCenter lacks, such as site exclusion, 50/50 ad creative rotation, easy uploads and downloads, etc.

However, adCenter has the advantage of demographic targeting – and now that Google's entered this area, it's going to become even more critical for the other PPCs to follow suit. MSN's demographic targeting options are relatively robust, and if they could be rolled into Panama, it'd be killer. Bottom line, though, if you asked me which interface I'd rather work in, the answer would be Panama, hands down.

As far as search technology and social networking, I think Google is still going to sit at the top of the heap. We've been talking about this at my agency this morning, and the general feeling is that even when the resources are pooled, MSN and Yahoo lack the algorithm, contextual network, and R&D capabilities to compete with Google.

Yahoo brings little to the table in terms of R&D and social media – in fact, would it have been smarter for MSN to bid on another contextual network, mobile ad provider, or social media platform? What does MSN or Yahoo have that can rival iGoogle?

Microsoft still has control of the desktop – would it have made more sense for them to invest the money in building an application that pushes content right from the desktop into social media? Google doesn't have that, and can't build it easily. Google Docs is a poor substitute for Microsoft Office, that's for sure.

It sounds to me like Steve Ballmer finally got tired of Google whipping MSN's back side in the PPC arena, and they felt this was the only way to compete. My opinion is that, while MSN and Yahoo combined have a much better shot at competing with Google in online advertising, Google is still way too far ahead of the pack – and Microsoft is nowhere near nimble enough to catch them, even with (especially with!) Yahoo in tow.

Dan Thies, president of SEO Research Labs

The two companies' paid search platforms are running on very different and incompatible technology, so if the deal happens, it's going to have to be "pick one" or "keep both." Since their search & portal offerings are also running on incompatible technologies, I'd bet on them maintaining two separate systems for PPC, and working to integrate client accounts first. It would be a lot easier to create one front-end interface than to clear the other hurdles.

Because their search & directory offerings appeal to different types of users, I'd be surprised to see them in any rush to merge them together. MSN's got some very interesting stuff going on under the hood in search, but they're running on very different technology.

If you look at the Avenue A / Razorfish deal along with this one, both deals make more sense. The assets acquired with Razorfish would have some synergy with Yahoo's social networking properties.

No matter what, even combined and under the best of circumstances, Microsoft and Yahoo are still playing catch up. The good news for them, if they can recognize it, is that nobody has really created a "best in class" offering for online advertisers, and Google hasn't yet combined their ad-related acquisitions in any coherent way.

Dema Zlotin, founder & VP of strategic services, Covario

As Google mentioned in its earnings call, social media has continued to grow, but monetization has been poor to date. Since Yahoo/Microsoft will control such a large amount of social media real estate with both owned properties and through partnerships (Facebook, Digg, Flickr, Yahoo Answers, etc), they will have a better chance of monetizing using behavioral and user-profile based targeting given their massive customer interaction databases. This is significantly different than Google's content-targeting approach to site monetization.

There will be redundancies. Microsoft Live and adCenter will be phased out and replaced with Yahoo's Panama and Yahoo's natural search platform. Combined technologies will be able to better monetize content such as XBox games.

Given Google's strength in EMEA, the combined entity (Microsoft/Yahoo) will not be able to significantly improve their position in EMEA in search, but will be extremely competitive in display media. In APAC, Microsoft/Yahoo will likely become a strong competitor in search and mobile.

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