What will Google do with Yahoo Search?

Techcrunch has just announced that Google & Yahoo intend to do a partnership around search. This is a great move by Yahoo, as they clearly did not do a good job with Panama (Yahoo Search Marketing). I was one of the search marketing experts that assisted the guys at Yahoo back in 2006 with planning Panama, and not many of my suggestions back in 2006 were followed. They thought they knew better…evidently not!

So, what’s is Google going to do with Yahoo? The right thing! The key to Google’s success is global distribution and billing (any customer, any language, any time, any country). Google will consolidate all the Yahoo marketplaces in all the different countries, and enable anyone, through a central interface, to bid on search terms from one central location. Yahoo should have done this from day 1, and Microsoft hasn’t realised this yet either. The politics around setting up a different “market” for each country clearly overcome good business sense by both Yahoo & Microsoft. Google did it right. This was the critical flaw in Panama. It just took too long to roll out a separate market for each country and then they didn’t achieve any of the benefits that a large advertiser base could achieve, across different markets. In other words – they reduced the Return on Effort for advertisers.

The problem with CEO’s such as Steve Ballmer & Jerry Yang, is that much of the knowledge around their advertising systems lies with Product Managers, and technical folk that are much closer to the customer and this information does not float up to the top. They are too far removed from the detail to understand how to run a good search operation – it’s not their fault, it’s just how large organization works. Google is so efficient at extracting value from search, and have been doing it for so long, that unfortunately, hiring a product manager with 5 years experience in search just won’t cut it.

As I said before in this post (2 years ago), Microsoft & Yahoo will never beat Google unless they understand first principles of search marketing as a business and industry – and as yet, I’ve not been proven wrong. If anyone has Steve Ballmer’s email, tell him to give me a call and let him know that I’m more than happy to help him fix AdCenter – no charge!

Update: Ok – now this proves how dysfunctional Yahoo’s thinking around search is. The announcement was just made and it only applies to US & Canada. Google is obviously happy to get a foot into the door without taking the rest of the world with them. It’s not a complete takeover of the search function, but more of a supplement to their own efforts with Panama. I’m very interested to see how this will be implemented, and if foreign searchers will see their local results on Yahoo.com (i.e. if they are not in a local Yahoo site).

Comments

  1. aaron wall says:

    Google did not want Europe for one big reason: limited upside potential with a high likelihood of drawing regulator scrutiny.

  2. Perhaps so, but Yahoo isn’t doing anything to centralize bidding for any of it’s global markets – they are missing why Google’s monetization yield is so much higher…

  3. aaron wall says:

    It is a major factor, but the lack of globalisation does not explain why a US click for “mortgage” is sold for $15 on Google and only $5 on Yahoo!

    I think there are 3 other big factors
    - Google’s huge marketshare
    - Google’s better relevancy (particularly on content)
    - Yahoo!’s nasty partner network which you can not opt out of! that dilutes their click quality (particularly in high value niches)

  4. Agreed – especially with point 3. The key strategic differentiator between Yahoo & Google is that Google allows advertisers to segment the userbase they want to target, Yahoo believes that by creating a mix of inventory, they will make more money – thereby cross-subsidizing (poor partners with good ones, for example). The mortgage example you posed is more in line with your partner/distribution point, than global markets – but the same principle applies. Advertisers are not willing to pay a premium for a blend of good and poor traffic. Yahoo also can’t offer an alternative to good partners, because their international traffic yields are so poor – hence the cycle perpetuates…

    I hope I’m making sense :-)

  5. aaron wall says:

    of course you are. I feel like we could probably have a chat and rail on Yahoo! for hours on end, but it is too easy :)

  6. aaron wall says:

    Google did not want Europe for one big reason: limited upside potential with a high likelihood of drawing regulator scrutiny.

  7. Perhaps so, but Yahoo isn’t doing anything to centralize bidding for any of it’s global markets – they are missing why Google’s monetization yield is so much higher…

  8. aaron wall says:

    It is a major factor, but the lack of globalisation does not explain why a US click for “mortgage” is sold for $15 on Google and only $5 on Yahoo!

    I think there are 3 other big factors
    - Google’s huge marketshare
    - Google’s better relevancy (particularly on content)
    - Yahoo!’s nasty partner network which you can not opt out of! that dilutes their click quality (particularly in high value niches)

  9. Agreed – especially with point 3. The key strategic differentiator between Yahoo & Google is that Google allows advertisers to segment the userbase they want to target, Yahoo believes that by creating a mix of inventory, they will make more money – thereby cross-subsidizing (poor partners with good ones, for example). The mortgage example you posed is more in line with your partner/distribution point, than global markets – but the same principle applies. Advertisers are not willing to pay a premium for a blend of good and poor traffic. Yahoo also can’t offer an alternative to good partners, because their international traffic yields are so poor – hence the cycle perpetuates…

    I hope I’m making sense :-)

  10. aaron wall says:

    of course you are. I feel like we could probably have a chat and rail on Yahoo! for hours on end, but it is too easy :)

  11. Shawn says:

    Either way you look at it now, Yahoo is Google’s puppet. How could you be number 1 on Alexa and be the first in the search engine game and not know what the hec you’re doing?

    http://www.shawndrewry.com/?p=95

  12. Shawn says:

    Either way you look at it now, Yahoo is Google’s puppet. How could you be number 1 on Alexa and be the first in the search engine game and not know what the hec you’re doing?

    http://www.shawndrewry.com/?p=95

  13. John says:

    Yahoo! just don’t get Search.. Good post Vinny!

    One thing I thought I read was the deal only applied to Yahoo! in the US and Canada?

    This will in affect mean that they still do not gain from the Global reach and once again prove that they don’t get it.

  14. John says:

    Yahoo! just don’t get Search.. Good post Vinny!

    One thing I thought I read was the deal only applied to Yahoo! in the US and Canada?

    This will in affect mean that they still do not gain from the Global reach and once again prove that they don’t get it.

  15. Violin says:

    Centralization is the key to success for Google and i think both companies(Yahoo and MSN) should follow this. As i am agreed with all of repliers and I think that was the biggest mistake by Yahoo.

  16. Violin says:

    Centralization is the key to success for Google and i think both companies(Yahoo and MSN) should follow this. As i am agreed with all of repliers and I think that was the biggest mistake by Yahoo.

  17. Quinton says:

    I' m interested in it too. That's why let me know about the general changes. I think the partnership of Google and Yahoo will be useful and favorable for everybody. Thanks for this information.

  18. Flug says:

    Hi Vinny,
    I have just read your suggestions and it´s a pitty that Yahoos´ representatives didn´t follow them, viz. didn´t even discuss them on a higher management level. I don´t really care about Yahoos´ health or efficiency, but am annoyed about the disabillity of their management: For a company that is eligible to be a global player it is inexcusable to not consider the weak signals in their strategic process. It seems that they set up a sort of masterplan as an untouchable silver bullet. Well, unless strategies have to be reconsidered continously, Yahoo ought to detect the gap to their goals much earlier and react much faster. I am curious about the outcomes of Googles´ “consulting”.

  19. Shon says:

    I wonder will yahoos alog’s change like googles

  20. Suzy says:

    This partnership fell through, didn't it? I think Yahoo has their own serp's and YPN.

  21. Yes, I agree "Centralization is the key to success for Google and i think both companies(Yahoo and MSN) should follow this". I think the partnership of Google and Yahoo will be useful and favorable for everybody.

  22. I really agree with that. The ideas of the both companies will be merge and has to be come up with better idea.

  23. Blog Tips says:

    thank you for sharing

  24. Designersart says:

    You can close this topic – Microsoft rules now Yahoo and Google has a new stronger opponent!