Microsoft and Yahoo gained approval from the US Department of Justice and the European Commission last week to move forward with integrating their two search engines into one. They have set a goal for completion late 2010 or early 2011. The two companies believe that this alliance will enable them to more effectively take on search giant Google. According to Hitwise, in January Google held 63.91% of search volume; Yahoo and Bing held 10.80% and 9.23% respectively. So they will have their work cut out for them.

To begin to understand how this will affect SEM, we need to look at how Microhoo will be set up. In a joint statement released by the companies they stated: “Yahoo!’s sales team will exclusively support high volume advertisers, SEO and SEM agencies, and resellers and their clients. Microsoft will support self-service advertisers. In addition, Microsoft adCenter will be the platform for all search campaigns.” Bing will gain much needed search volume, while Yahoo will gain access to Microsoft’s technology development resources.

While they may not make a huge dent in Google’s search volume dominance, there is an opportunity to take revenue from Google through the addition of big money advertisers. The potential increase in search share that this alliance brings has been the focal point of the recent press releases, looking at it as a potential to not grow only traffic, but quality in traffic may be a better approach. It is unrealistic to believe that Microhoo will be able to increase traffic enough to be sitting on par with Google. Searchers are very loyal and don’t like change. But by driving more relevant, convertible traffic they can increase their revenue through higher click through rates.

The most noticeable difference will be that all campaigns, on both Yahoo and Bing, will be managed through the adCenter interface. This is a great opportunity for savings in both time and resources for advertisers. We will have to wait and see what if any features in the current Yahoo interface are integrated into adCenter. The transition from Yahoo’s algorithm to Bing’s could be a potential trouble spot. As we all know the two engines behave very differently, and for example, just because an ad has a great click through rate on Yahoo does not mean it will on Bing. It will be interesting to see how this could positively or negatively impact campaigns that are currently running.

As a whole the announcement seems to be viewed with guarded optimism. This is an opportunity for Microhoo to catch up to Google in terms of algorithm, API, and targeting technology. Microsoft can focus on what they do best which is development, and leave the selling to Yahoo. At the same time, if it is approached wrong it could be the final nail in the coffin for Bing and Yahoo, who have long struggled to compete with Google. It is too early to tell how the alliance will pan out. Look for another post on the subject from me a year from today, and I will let you know how it went.

If you would like to learn more please visit www.searchalliance.com