Bing was tipping point in Microsoft-Yahoo deal

IDG News Service - The successful launch of Microsoft's revamped search engine, Bing, was likely the event that tipped the scales in favor of Yahoo agreeing to a search deal, analysts said.

When Microsoft relaunched Live Search as Bing early last month, the company gained some early ground in search, mainly at the expense of Yahoo, according to analysts' statistics.

That early momentum showed Yahoo CEO Carol Bartz that Microsoft could create a search engine that was capable of drawing new users, and that it would benefit Yahoo to take advantage of the technology, said Neil MacDonald, vice president and distinguished analyst at Gartner Group.

"I credit Bing for being what tipped the deal finally over the edge," he said. "Microsoft has shown they can actually do something that has a chance of reversing the slide of both Yahoo and Microsoft against Google."

Microsoft and Yahoo have been losing ground to Google for some time in search queries and search-based advertising. But it took the companies more than a year to hammer out Wednesday's agreement about how to unify their search businesses.

Under the terms of the 10-year deal, Microsoft's Bing search engine and adCenter platform will power Yahoo's search-based advertising business, while Yahoo's sales team will handle both companies' premium search customers.

Bartz complimented Microsoft on its Bing technology just last week, on a conference call to discuss Yahoo's second-quarter earnings.

"I think Microsoft should be given kudos for Bing; it's a nice product," she said, adding that it was too early to say if people are visiting the site out of curiosity, or if it will help Microsoft to increase its market share over the long term. Microsoft and Yahoo were said to be close to a deal at the time, but nothing official had been revealed.

Though Bing seemed to be a major revamp of Live Search, it consisted mainly of features that had been in Live Search for a while, with some algorithmic and user-interface changes being the main differences, said Matt Rosoff, an analyst with Directions on Microsoft.

The problem was, not a lot of people used Live Search or knew about those features, and the rebrand was Microsoft's way to draw attention to the product, he said.

Bing and the marketing efforts around it have done just that, and early reviews indicate that the new search algorithms are an improvement not only on what Microsoft had before, but also on Yahoo's search engine, Gartner's MacDonald said.

Aside from being good technology, Bing also proved that Microsoft was serious about its investment in search, he said. That likely encouraged Yahoo to give up its search investments in favor of Bing so that it could focus on delivering better online content via its portal to drive online and display advertising.