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Analysts: Microsoft-Yahoo deal won't put Google on red alert

Search giant Google not expected to alter strategy or panic due to joint assault

July 29, 2009 03:30 PM ET

Computerworld - With Microsoft Corp. and Yahoo Inc. signing an Internet search and advertising agreement today, some might think that search giant Google Inc. would be nervously looking over its shoulder at the oncoming assault.

Not so much, say some industry analysts, because the new alliance should be neither unexpected nor disconcerting to Google. Basically, they note, those at the top of the heap are used to everyone gunning for them, even when the guns belong to industry heavyweights like Microsoft and Yahoo.

"I don't think they're going to be very afraid of this," said Karsten Weide, an analyst at IDC. "A number of people have said Google should be scared now, but it's not like this is going to change the world or turn things upside down. This is going to make Microsoft and Yahoo more competitive but it's not going to dethrone Google."

After reports of a Microsoft-Yahoo deal surfaced late yesterday, the companies made it official this morning. The two companies announced that they had finalized negotiations on a long-anticipated deal that will have Microsoft's Bing search engine powering Yahoo's sites, while Yahoo sells premium search advertising services for both companies.

The partnership, which was a year and a half in the making, is geared to enable the companies to take on behemoth Google with a united force. This new Microsoft-Yahoo partnership could give the two companies some much-needed leverage in their ongoing -- and until now, separate -- battles to loosen Google's stranglehold on the search market.

Individually, neither company has had much luck in efforts to chip away at Google's well-polished, and well-funded, armor.

Early this month, Web analytics firm StatCounter reported that Bing may have nibbled away at Google's commanding lead in the search arena since its unveiling a couple of months ago, but it certainly hasn't taken a big bite. While Google's share of the search market dipped from 79.07% to 78.48% in June, Microsoft's small share grew from 7.21% to 8.23%. Yahoo is hanging in at a distant second place to Google with 11.04% of the market.

Ezra Gottheil, an analyst at Technology Business Research Inc., said he doesn't see the new deal forcing Google to shift strategies. "I think that any successful company lives with a certain amount of paranoia," he said. "It's not like they'll just start worrying now. They always worry. There's no reason for them to show desperation or panic. It's not like Google is going to red alert."

In an e-mailed statement to Computerworld, a Google spokesman concurred. "There has traditionally been a lot of competition online, and our experience is that competition brings about great things for users. We're interested to learn more about the deal," he said.

Dan Olds, an analyst at Gabriel Consulting Group Inc., noted that this is just another salvo in Microsoft's long-standing battle to steal search momentum from Google -- a long and so far unsuccessful battle.

"I don't expect to see Google make any big changes in its search offerings or strategy in the wake of this deal," he added. "It isn't taking them by surprise, and they've had plenty of time to plan for it. I would expect them to continue to tend to business. That's how they got in the top position to begin with."

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