Yahoo has finished transitioning to a Bing back-end in every country except Korea. The near completion of the global transition should signal improved profitability for both Bing and Yahoo.
Yahoo and Bing: A Hair Away from Global Fusion
When it comes to organic search, Bing and Yahoo are essentially the same entity in most countries. That’s thanks to a 2009 partnership and the gradual integration of Bing’s back-end functionality (algorithms, ads, etc.) with Yahoo’s established front-end.
As of the most recent Yahoo update, Bing runs Yahoo in every country but Korea (where Bing will take over by the end of the year) and Japan (where the independently run Yahoo Japan chose a Google partnership).
The Korean integration is delayed only because it involves “three-way integration between Yahoo, Microsoft, and Daum.” However, all the integration has been complex. As stated by Kartik Ramakrishnan, Yahoo’s VP of Search Engineering, the process “was not simply a matter of technical integration through the Bing API. We worked with Microsoft to ensure that Bing’s algorithmic quality in each of these markets was on par or better than Yahoo!’s quality.”
In cases where there was a gap, Yahoo collaborated with Bing to improve the regionally targeted results. Additionally, numerous other features (e.g., image searches, third-party searches run by Yahoo, Yahoo Search BOSS, etc.) had to be transitioned. Hardware also had to be updated, customer support had to be put into place, and support for existing Yahoo properties had to continue.
Now that’s a hair away from being done. Once Korea has joined the alliance, Bing-Yahoo will be a global entity.
Why the Transition Means Improved Profits
When Yahoo and Bing joined forces in July of 2009, both knew that it would be costly. The companies were to split the costs of the global transition.
As far as long-term returns, both companies looked forward with a hopeful eye. Bing would be able to pick up 25 percent of the profit from all Yahoo searches and would gain significant appeal to search optimizers and marketers. Meanwhile, Yahoo would be able to focus on its profitable elements while cutting costs and keeping 75 percent of their profits from search.
Now, the benefits for both companies continue, but the cost of operations will subside. Yahoo will be able to safely let go or reassign those working on the transition and the support of current services, while Bing can stop paying for transition costs while gaining access to a greater share of the global market.
This doesn’t necessarily mean “invest now,” but it should mean a nice up-turn in quarterly earnings starting no later than Q1 of 2012.