Microsoft-Yahoo deal. the enemy of my enemy is my friend.

The hot topic this week, was the announcement that Yahoo and Microsoft have finally tied the knot (corporately speaking). After two Yahoo CEO’s and almost year and a half of negotiations, they have agreed to combine their search and advertisement businesses. Technology Mammoth Microsoft has agreed to pull the strings backstage the search technology on Yahoo, and Yahoo is going to sell premium advertisement for both companies. That info you already know, because it has been thoroughly covered in the media. Let’s talk the deal further so I can get off my chest all the weird fishy stuff that is lying underneath.

Enemies-Friends-Enemies-lovers

If I’m not mistaken, Microsoft tried to pull out a hostile takeover on Yahoo last year. And, if I’m correct, Microsoft was so aggressive in its aim to get hold of Yahoo search technology, that it forced Yahoo to seek protection in goliath Google. This love-hate story started when Microsoft placed a bid of about 45 Billion dollars to buy Yahoo. Yahoo was almost insulted, alleging that number highly underestimated the company’s real value. Jerry Yang, then CEO of Yahoo, undertook some interesting actions to resist the sharks pressure, showing the world they were no easy catch. They acquired the online video player from maven networks, introduced video support for Flickr, and launched Yahoo Buzz. Adopting these measures in a time span of just a few months was a real show of strength to reinforce the idea that Microsoft underestimated them as an autonomous, healthy competitor. But here comes the fishy part. As part of their moves to relief themselves from Microsoft’s pressure, Yahoo made a deal with Google in which they accepted to include Google ads in some of their search results. Google and Yahoo stated at the signing of the deal, that they would not set back to any possible negative review from department of Justice. Days later, they said they would delay the implementation of their agreement, to give regulators the chance to review it, although they cared shit about the outcome. (of course they stated this in a far more decent way) Nobody expected, as juicy as the deal could be, that both parts would call it off just four months later, foreseeing a negative evaluation by the antitrust commission, and alleging corporate prudence. I mean…WTF? If they knew that the agreement was going to have a rough road to approval at the department of Justice… Why did they bother in the first place? Didn’t they say at first they gave a shit? What happened here?

Now tides turn again and after the appointment of a new CEO, former Autodesk executive Carol Bartz, Yahoo and Microsoft suddenly enter a flirting mood again, closing a ten year arrangement that, at least on paper, decapitates Yahoo’s search engine. (one of its past strongholds) and automatically gives Microsoft an approximate 17 percent of the global search volume. This sounds even weirder, when we look back a couple of years, and find out that Yahoo had invested since 2002 almost two Billion Dollars into development  of their own search engine. This figure seems huge, and even more grand if we take into account that Yahoo has a yearly revenue of slightly over 8 billion in the most optimistic of cases, and a cash flow of 3 Billion.

To me, it seems that Microsoft is desperately… really desperately looking to grasp a larger piece of the search pie, and wouldn’t stop for anything. We’ve all seen how they have branded and rebranded their search technology like three or four times in the past two years in futile attempts to change consumer habits. (like confusing net surfers were a brilliant marketing strategy) The blue giant’s history in the search venture has been one of constant trips and falls, watching from the floor how Google passes over them in ballet kind of fashion. Microsoft had to do something about that, there is just too many money at stake.

So… where do consumers stand? How can this affect me as an everyday icon, maps or porn seeker? I think that in plain terms of search results, Google and Bing have almost identical products. (You can click here to read this interesting post by Tom Spring with a comparison between search engines) What really sets them apart is their integration with additional services and apps. The Google guys are geniuses at integrating all their stuff, and nobody has beat them yet at that game. When you use their search engine, you are two clicks away to signing up to their Email, reader, maps, so on and so fourth almost without even knowing. In contrast, Microsoft Services are scattered, baroque in design, and smell of sulfur. (just a silly joke there. Couldn’t help it.) The merger with Yahoo will probably lead Microsoft to that pathway, plus the mouthful of services Yahoo already gives, and that everybody loves. So in the long term, I think Microsoft is gaining huge leverage to compete. And that would be very good for Yahoo too, because the more advertisers Bing gains, the more Yahoo will also earn. Yahoo is kind of betting to be the Lions tail, rather that a head of a mouse. What I don’t understand is that in this story, the mouse was the number 2 in the market of search engines. Sometimes elephants are impossible to stop.

This naughty threesome tale has not ended just yet. They still have to wait to final approval by the Department of Justice. I just can’t wait what will Google do now. They have to be pretty shaken looking that the race has tightened even more.

Sidenote: Did you know Erin Andrews is the most searched woman in the Internet these days?