Yahoo! Will Benefit From the Bing Deal

I just don’t understand why Yahoo! is taking so much criticism for it’s search deal with Microsoft. OK, so there were no “boatloads of money,” but does the share price decline mean that Yahoo!’s price had those boatloads baked into it? I guess so, which means that investors actually believed that money would appear – a pretty lonely position.

Moving beyond the upfront payment issue, let’s think about the wisdom of the rest of the deal. In the minds of consumers at least, Yahoo! had long since stopped being a player in search. Yahoo! search is used by people who are on one of the company’s content sites and happen to have the need to search. They’re already there, so why not use the easy to reach search box? But the point is, users are on Yahoo!’s site for the content, not the search. We may want to look back to Yahoo!’s start as a search engine and lament the loss of one of the industry’s former leaders, but that was then, this is now. And now Yahoo! is a content company that aggregates audiences for advertisers.

As a content company, Yahoo! had no business trying to match technology with Google and Microsoft, and knew that it would lose at that game, so this deal allows it to simply buy off-the-shelf technology for a non-core piece of it’s business. Selling advertising into that piece, however, is core and Yahoo! has retained that ability. The resources that Yahoo! had to devote to search can now be redeployed to areas where it can really ad value – content and advertising innovations.

Most of the reporting on this deal has viewed it as Yahoo! selling its search business to Microsoft. As someone who has run content web sites, I view it as Yahoo! hiring Microsoft to take over the burden of managing and developing a technology important, but not core, to its sites. In that respect, I think Yahoo! got a pretty good deal. And all of this worry about whether Yahoo! can succeed without search? If it kept using its own search technology that was never going to make it a success, so the question was always there. If Yahoo! fails, it won’t be because of this deal, but if it succeeds, this deal will have helped.

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