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What Would a Yahoo-Microsoft Merger Look Like? Part 1

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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'll share part one today, and parts two and three tomorrow.

Ian McAnerin, chairman and CEO, McAnerin Networks

The first thing that comes to mind is "wow."

It's not a surprise from a "needed to be done to compete with Google" viewpoint, but it is a surprise from a "I'm surprised Yahoo ended up so weak that this was even a possibility." With the recent layoffs and other issues, as well as Google's share price drop recently, this is very, very good timing on Microsoft's part.

Some thoughts:

I think Microsoft's adCenter is generally better than Panama, and certainly less likely to crash in my experience. I'd like to see the best functionality of Panama incorporated into adCenter, rather than the other way around. AdCenter also has some excellent demographic targeting from information gleaned from Microsoft's network. If they then incorporated information from Yahoo's network, it would be a huge benefit to them, both from an accuracy and a usability perspective.

Both Microsoft and Yahoo have several search-related patents – combining them may well allow them to finally narrow the "Google gap" (the huge difference in percentage of the search share market).

Microsoft can offer money, technology and excellent management processes (something Yahoo sorely lacks), while Yahoo has experience, reach, passion and credibility on their side.

I'd like to see some of the pricing and processes that Microsoft used on their old SBD to the Yahoo Directory – currently the Yahoo directory is generally considered overpriced and underutilized.

If I were Microsoft, I'd do an audit (they probably already have, before offering to buy them) on all the current Yahoo offerings and only address the ones that don't seem to be working first, rather than trying to change everything. Yahoo has some amazing stuff that is best left to continue being amazing. I'm more concerned about their internal processes, organization and lack of clear vision, something Microsoft can probably help them address.

This is not to say that Microsoft is very well organized in their search – both companies lag behind Google in the international implementation of their PPC vehicles, for example. This is not a good thing, especially since Google themselves are fairly disorganized in this area. However, if Yahoo and MS worked together it would probably be a good thing for everyone.

Currently Google ignores everyone else and just focuses on their own way. This worked well when they were smaller, but now it's starting to cause issues because they are beginning to develop a bureaucracy, rather than the meritocracy they used to have, if only due to the number of people they have. This means that Microsoft and Yahoo have a real opportunity to move ahead while Google focuses internally.

Everything seems to indicate that the timing is right. The real question is Yahoo's pride – will they merge or purge? Join with Microsoft or continue to lay off employees?

Mike Yanke, lead account manager, TopRank Online Marketing

What strikes me most about this plan is that Microsoft sees this as their best opportunity to thwart Google.

What's not being said is that Microsoft sees this as their best opportunity to reinvent Yahoo as the world's premier search engine.

What could potentially happen is a situation where two gargantuan forces work day and night to thwart one another, as opposed to trying to evolve into what searchers demand they become.

This could possibly open the door for up & coming search engines, Ask.com for example, to gain mindshare, not by competing with their larger rivals, but by focusing on their own evolution based on the increasing demands of users.

An analogy could be wrapped around the ongoing war between the Yankees & the Red Sox.

Each season, they seem overly concerned with only beating each other, as opposed to winning a championship

(despite what they say). Half the time, when looking at the last 10 seasons anyway, one of them will win it all.

The other half of the time, however, the stage is set for someone else to step up and reinvent themselves as something so great it was never before thought possible.

Liana Evans, director of Internet marketing, KeyRelevance

I think I might have a little different view than a lot of people: I view this as a negative turn of events for Yahoo. I hope that Yahoo turns down the offer from Microsoft and says, "thanks but no thanks." Yahoo has a lot of potential, especially if it can effectively leverage its rather in-depth knowledge of social media. Most of the companies Yahoo has acquired in the last year or so have had a social media focus and with the way the use of the internet is moving, the social side of the industry is just busting at the seams to have a "leader" here. Yahoo could be that leader.

Microsoft on the other hand, buys companies and really doesn't know how to leverage them properly. Can you remember the last successful acquisition that Microsoft has made good on? I can: Visio. Beyond that, they are horrible at search. They have to buy companies in order to move forward. They own an SEO company (Avenue A | Razorfish) and those employees don't even get access to the search engineers!

Companies that were once vibrant startups that get enveloped into Microsoft are practically never heard from again. Microsoft and social media? While "Spaces" might be a big draw for them, they really still have no idea what to do in this space. Then we look at are they "MSN" or are the "Live" – they cannot even figure that out. They cannot even produce a search engine that give relevant results without half of the list being spam. Too much "bad" with Microsoft and search cannot be fixed by acquiring Yahoo.

I think this is just a sad day for our industry, Yahoo once a bright and shining light with a lot of potential in the social space, might get swallowed up by this old stodgy behemoth who will do anything to TRY and beat Google.

Ron Jones, president of Symetri Internet Marketing

Microsoft has been floundering distantly behind Google for years now, and the new branding switch from MSN Search to Microsoft Live online environment amounted to a laughable attempt to be just like Google. It's like your little brother trying to copy your metal shop project with yarn and Scotch tape, only he's your much older brother. Honestly, though, how many people have heard of Spaces, xRank, HealthVault, or QnA, let alone use them like you would MySpace, Google Trends, WebMD, or Yahoo Answers?

The best answer for Microsoft, should the deal go through, would be to scrap these ancillary, late-to-the-prom failures and adopt the Yahoo version and brand. Focus on the Live Search and, just perhaps, make people aware of it. Finally, blend the Microsoft adCenter with Yahoo's Panama, taking the good pieces of adCenter and adding it to the superior interactivity and usability of Panama, even though a "best of the best, sir!" hybrid would still lack the AdWords user-friendly happiness.

Chris Copeland, senior partner and managing director for North America, Outrider North America

1. The benefits of combining Panama and adCenter, or replacing one with the other.

It's hard to see a scenario where combining comes to fruition. These are two complex systems that would take too long for two organizations criticized for slow development to pull off. The adCenter platform was built for far more than search-only advertising, and given where the real strength of this deal may lie, that seems to be the more important long-term piece to get right.

2. Best way to combine the search and directories of each company.

I think you have a clear leader in the search space between these two and it feels somewhat foolish to not allow Yahoo to lead the way in the search space. Microsoft has been trying for several years now and has made virtually no significant progress on market share. That being said, Microsoft has been bolder about integration of universal search-type aspects, and that approach would serve both vehicles well.

3. The benefits Microsoft would see by adding Yahoo's social networking properties, or how a Microsoft acquisition might affect those properties?

This is where things get fuzzy. Culture will be a hot topic in all discussions around this potential merger. The corporate cultures are very different. Likewise, the audience cultures are very different. Just because Microsoft might buy Yahoo doesn't mean Yahoo users will want Microsoft products thrust upon them. While this creates true scale in the social space, the fickleness of that market may dictate a status quo approach or subtle integration into Microsoft products vs. a full-on adoption and integration.

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