Microsoft - Yahoo deal is no big deal
Jul 29th 2009 2:30PM
Updated Dec 4th 2009 6:56PM
This deal was the Holy Grail for Microsoft CEO Steve Ballmer, a transaction he tried to do last year for a whopping $45 billion.
Former CEO Jerry Yang demurred but from the start of her leadership new Yahoo CEO Carol Bartz refused to rule out a deal. Now it's happened and has raised hopes that the union of the two battered tech giants would finally provide the girth to joust with the mighty minions of the Googleplex. Unfortunately, this is hardly the case. The deal means little and its consummation, while necessary, is rearranging deck chairs on the Titanic.
On paper, the new alliance seems to make sense. The unified entity will benefit from broader sales teams and reduced R&D and technology costs due to realized synergies. But this game is already lost for a very simple reason. John Battelle, an expert on Google and search, opined on his blog that a huge reason for Google's growth was a rapid increase in search ad purchases by small businesses. I personally agree with him because large businesses tend to be the last ones to embrace new technologies. Small businesses have less to lose and more to gain by trying new things.
And, having run small businesses myself, I also know a thing or two about how they think and behave. And I can tell you this. Very few small business want the hassle of managing ad campaigns on two different search platforms using two different logins and learning two different ways of doing things.
The average small business person barely has time to go to the bathroom, let alone master redundant online tools. For most small businesses, Google has worked great until now and they see no reason to change. Yes, there are some nifty online tools that let small businesses manage campaigns across display and multiple search options. But most small businesses don't want to pay extra for those tools. They want to pay nothing and use Google's own quite excellent Google Analytics package which, by the way, is very tightly integrated into the Google search and display advertising and purchasing platforms.
For their part, larger businesses, and the media buyers who rep them, will divide up their spend along party lines, at best. They like to have an alternative to Google around, understandably. But that's not much of a win for Microsoft and Yahoo because market share match buys won't move the needle a bit from where revenues were before. Very few larger businesses will go out on a limb and throw big resources behind buying search ads from Microsoft and Bing. That's because buying Google ads is now like buying IBM (IBM) servers or Cisco (CSCO) networking gear. No one ever gets fired for buying old reliable, the industry standard.
I don't think this is a bad deal for Yahoo and Microsoft. They really have no other choice. But I am skeptical that this deal will really matter much, one way or the other. Getting a mom-and-pop to move their ad buy from one search engine to the other is about as easy as convincing them to cancel a key client meeting to go in for a root canal. Since that might be the only place to gain market share, the new Yahoo-Bing team will clearly have a tough road to hoe.
Alex Salkever is a senior writer at AOL Daily Finance covering tech and green tech topics.