Should Google be afraid of the Microsoft / Yahoo deal?

Just recently, Microsoft and Yahoo announced that they’ve signed a 10 year agreement in which Microsoft will license Yahoo’s core search technologies, and Microsoft’s Bing will become the exclusive algorithmic search and paid search platform for Yahoo sites.

Under the agreement, Yahoo! would focus on its core business of providing consumers with great experiences with the world’s favorite online destinations and Web products. The companies expect the closing to occur in early 2010.

Microsoft will pay traffic acquisition costs at an initial rate of 88% of search revenue generated on Yahoo sites for the first five years. Yahoo sees the deal lifting annual operating income by around $500 million and capital expenditure savings of $200 million. Yahoo sees an annual operating cash flow benefit of $275 million.

No doubt the Microsoft-Yahoo deal is aimed straight at Google. But should Google press the panic button? Not yet, not now.

According to international search marketing agency WebCertain, the Microsoft/Yahoo partnership could just be the beginning of a global anti-Google movement.

It may appear that Google has nothing to worry about, as its 64.1% global market share is far from being significantly damaged, however this deal could be the first of many partnerships as search engines from around the world look for new ways to compete with Google’s dominance.

Many local search engines such as Seznam and Baidu which are very strong in their domestic markets, have been as yet unable to expand into international markets. This can be attributed to several factors including a lack of an international sales force and complex interfaces purely in the target language, which render it impossible for many international marketers to even consider using them.

Therefore, the proposition of joining forces with an established global player, such as Microsoft could, and should, be very appealing to the local search engines.

One thing seems clear in this, Google is the common enemy and while it is very early days, the Microsoft/Yahoo could be the first sign that Google’s position as the world’s biggest search engine will not be safe forever.

Let’s wait and see.


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