Last week it was announced that Microsoft had made a bid to purchase Yahoo! at $44.6 billion. This is not the first attempt to make a bid by Microsoft. However, because of Yahoo’s depleting stock, the merger is looking more and more favorable now then it previously was. Analysts offer great expectations of this merger and weigh in on how it will affect the furture of search engines.  Our search experts also weigh in on this merger and provide their summations.

A Media Perspective 
From a strict search perspective, we are in a sense, coming full circle.  Until MSN rolled out its AdCenter in 2006, Yahoo! was powering the search results on this engine.  It will be interesting to hear the decisions made about the branding of the platform, and how the two are merged.   One of my initial reactions was the optimistic view that if the two platforms merged, and maintained MSN’s demographic targeting capability, there could be a strong point of differentiation between Google and the Yahoo/MSN.  However, this proved to be too hasty a response, as this week, Google rolled out a beta of demographic targeting capability within AdWords.

In attempting to consider which platform is the stronger of the two, the benefit that I see to Yahoo! is the ability to target users by IP address (similar to Google), which in my experience has proven to drive a higher volume of qualified traffic than other means of user identification that MSN employs.  On the other hand, I do find MSN AdCenter to contain more robust reporting capability, particularly from an ad performance perspective.

Yahoo! and MSN are both
o often seen as portals
o contain a large amount of content
o have a strong user base

Yahoo! has made definite strides towards enhancing its image based advertising offerings, including the Right Media acquisition in 2007, and the development of behavioral targeting capabilities.  The merger could help to develop a strong premium content network for the two brands, with heavy usage/traffic availability. 

The news is being touted as an effort to take on Google’s share within the search space.  While from a platform development perspective, there is potential that the merger will create some differentiation for Yahoo!-MSN against Google, the timelines and process would be extremely important for the platform integration.  If a lengthy transition occurs, this could give Google an even larger lead in the market place both from a traffic capture
perspective, as well as technology advancements.

Advertising Opportunities
The greatest impact may be to the online display advertising space.  The combination of these giants will provide the company with reach unsurpassed by any other online property.  If the two properties remain unique, the opportunities within the display advertising space would reach across both properties.  Hitwise says that 15% of all Internet visits are represented by Yahoo!-MSN and a combined 1 billion in unique visitors a month.  This would provide a huge advantage and boost to the display advertising for the new company.  

Within the search space, this merger would make Yahoo!-MSN a clear number two in the space with ~30% of the market share.  It seems likely that one ubiquitous ad platform would eventually make its way across both properties.  It is too soon to speculate how this will impact; however, it is known that conversions from Yahoo! and MSN tend to be greater than that of Google.  Perhaps there could be a fight on Google’s hands if Yahoo!-MSN uses this new reach effectively.

One other impact could be increased innovation across the entire channel.  More competition tends to spark better innovation.