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CEOs: Devil was in details of Yahoo, Microsoft search tie-up

Elizabeth Montalbano | July 30, 2009
Carol Bartz and Steve Ballmer said they needed time to hash out the specifics of a deal that took more than a year to seal

The companies also worked hard to ensure they could protect the privacy of their customers and users when sharing information between them, he said.

Another factor the companies weighed in the deal is the opportunity it gives them to reach a larger network of advertisers to compete more effectively with Google, Bartz said. Google has about 78 percent of the search advertising market in the U.S. and about 92 percent in Europe, Ballmer said on Wednesday.

"What's really important about this deal is scale," Bartz said. "It's great news for all of our customers and will really allow us to create more innovation in search and real consumer choice."

Indeed, scale is one big benefit the two companies will get from the deal, agreed industry analyst Greg Sterling from Sterling Market Intelligence, who echoed Bartz's sentiment. That scale, he added, "makes them more viable competitors to Google."

When asked how Yahoo will continue to innovate in search when it essentially will shut down its own search-engineering efforts in favor of using Microsoft's, Bartz said that Yahoo's display-ad business and engineering efforts can benefit from the combined search business. Both companies are retaining their display-advertising businesses, which are not a part of the deal.

"There is a lot of innovation that happens above search results -- how it's integrated with search that goes on the Yahoo side," Bartz said. "We're kind of learning we can use search data for display targeting. There is a lot that can happen."

Yahoo's mission is to be the primary destination for media and content for Web users, she said, and a search deal with Microsoft will help the company gain even more users to achieve this goal.

"Yahoo is the place where millions go every day to see what's happening," Bartz said. To accommodate them, Yahoo launched a revamped home page earlier this week that focused on the ability of users to customize it according to personal preferences.

Indeed, Yahoo made a pragmatic decision to reallocate money and resources from search engineering to other areas that it considers more important for its business, while Microsoft clearly decided it was in the search market for the long haul when it last month launched Bing, a major overhaul of its only marginally used Windows Live Search engine, said Gartner analyst Allan Weiner.

However, it's not entirely clear what Yahoo will do with the resources it is freeing up from search, said Weiner, who wasn't very impressed with Yahoo's recently redesigned home page. "The new home page isn't a sign of major innovation," he said.

Yahoo needs to provide concrete examples of how it plans to innovate in non-search areas. "We need more clarity from Yahoo about that," Weiner said.


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