Yahoo! still intends to compete with Microsoft on internet search

Posted Aug 27th 2009 2:30PM by Brian White
Filed under: Consumer Experience, Competitive Strategy, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO)

Yahoo! Inc. (NASDAQ: YHOO) made the decision to use competitor Microsoft Corp.'s (NASDAQ: MSFT) Bing search technology soon to power the internet searches across its vast empire. That doesn't mean that Yahoo! still won't compete with Microsoft aggressively. After all, Yahoo!'s agreement with Microsoft is only to use the software giant's Bing search technology in the back end -- not in the customer's face.

Yahoo!'s Prabhakar Raghavan indicated that "It is our belief that the battle has moved beyond the back end ... what we do with it, how we paint it, how we render it, that's entirely up to us." This confuses the issue a bit but what he is saying is that Yahoo! will use Microsoft's technology, but will still heavily compete with the company in terms of customer-facing search market share. The thoughts of a Microsoft-Yahoo! full-frontal assault on Google Inc.'s (NASDAQ: GOOG) market-leading share won't really be positioned that way after all.

Microsoft will have close to 30% market share in internet search once it begins powering Yahoo!'s search along with its own using the newer Bing search offering. But, will that market share ever grow? Both Microsoft and Yahoo! have been very unsuccessful at over the years in taking market share from Google. Unless Microsoft's Bing is really a better product -- and both Bing customers and Yahoo! search customers start noticing that and using it more and more -- will any of this make a difference for the combined search market share of Microsoft and Yahoo!? That's the billion-dollar question.

When Yahoo!'s Larry Cornett says things like "We're going to make it much easier for you to find and explore what matters to you most," that's not enough. Google already does that, and very well. Microsoft's Bing, now about to power Yahoo! search, better evolve into something special -- and better for the consumer -- compared to Google. Customers will need to know about that fact, if it becomes true.

So what's Yahoo!'s search strategy here? If it's something like "the all-new Yahoo! search is here!," then customers will yawn. And so will Yahoo!'s share price.

Tags: Bing search, Google, inthenews, Larry Cornett, Microsoft Corp., MSFT, Prabhakar Raghavan, Yahoo, Yahoo search, YHOO