Microsoft/Yahoo Deal Makes Google Stronger

August 12, 2009

Bing-Yahoo-search-engineNot 0nly do I not believe the hype that the deal between Microsoft and Yahoo will hurt Google, I actually believe it has positioned Google to grow even stronger. Why?  Well lets take a close look at the deal first.

Under the terms of the agreement, Microsoft’s Bing will power all Yahoo search sites, and in return Yahoo will sell premium advertising for both companies.  This creates a partnership where each company is using one of its strengths to help the other.  It creates an atmonshpere of no competition among these two companies, essentially making them one company in the search industry, and thus the number 2 competitor to Google in the area.

What the deal does not do is add any more ingenuity or creativity to either company.  What the deal does not do is set up a jointly run division with new talent and new ideas.  It takes the Bing search results, puts them on Yahoo’s sites, and allows advertising to flow freely across both companies’ websites.

Google has come out publicly and welcomed the competition when most people expected them to challenge the agreement, much like Microsoft challenged Google’s own search deal with Yahoo last year.  This deal, like that one, must pass scrutiny by anti-trust regulators.

However, if it does pass, as many expect it to, I think Google has made the right choice not to challenge it.  They will still remain the dominant player in the industry, at close to 70% of all search traffic.  And the combination of #2 and #3 in the industry will make the barriers to entry that much higher. Now, instead of a bunch of small competitors chasing Google, you will have a solid #2 player who will hold off some of the competition that Google should have gotten.

In addition, I think that this deal will send some competitive energy Google’s way.  It will keep them on their toes, make them take a few more chances in their search strategy, and maintain that culture of innovation that has taken them so far.

Of course this is only one man’s opinion.  What do you think?  Is Google better off with Bing and Yahoo on the same team or are they in trouble for this first time in years?

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