Oxford SEO Studies Blog

Only a year after the collapse of the $47.5 billion deal to buy Yahoo, Microsoft and it’s former prey have entered into a pact to take on Google’s 2/3 search market share.  he Microsoft-Yahoo pact is a measured step that represents a pragmatic division of duties between the two companies instead of the hostile takeover bid last year that was blocked by co-founder Jack Yang, since replaced by Carol Bartz, an outsider who is now Yahoo’s chief executive.

Under the arrangement Microsoft will provide the underlying search technology on Yahoo’s popular Web sites harnessing many of the recent semantic web innovations developed for Bing. The deal provides a higher profile for Microsoft’s recent overhaul of its search engine, Bing, which is gaining popularity with its semantically sensitive algorithms producing competitively more relevant results than Google on equivalent searches.  Bing’s praise and favorable reviews for it’s magazine-like SERO layout, hasn’t yet affected Google’s share of the search market, but has established the engine as here to stay and one to watch.

The key terms of the agreement are as follows:

• The term of the agreement is 10 years;
• Microsoft will acquire an exclusive 10 year license to Yahoo!’s core search technologies, and Microsoft will have the ability to integrate Yahoo! search technologies into its existing Web search platforms;
• Microsoft’s Bing will be the exclusive algorithmic search and paid search platform for Yahoo! sites. Yahoo! will continue to use its technology and data in other areas of its business such as enhancing display advertising technology;
• Yahoo! will become the exclusive worldwide relationship sales force for both companies’ premium search advertisers. Self-serve advertising for both companies will be fulfilled by Microsoft’s AdCenter platform, and prices for all search ads will continue to be set by AdCenter’s automated auction process;
• Each company will maintain its own separate display advertising business and sales force;
• Yahoo! will innovate and “own” the user experience on Yahoo! properties, including the user experience for search, even though it will be powered by Microsoft technology;
• Microsoft will compensate Yahoo! through a revenue sharing agreement on traffic generated on Yahoo!’s network of both owned and operated (O&O) and affiliate sites;
  • Microsoft will pay traffic acquisition costs (TAC) to Yahoo! at an initial rate of 88 percent of search revenue generated on Yahoo!’s O&O sites during the first five years of the agreement; and
  • Yahoo! will continue to syndicate its existing search affiliate partnerships.
• Microsoft will guarantee Yahoo!’s O&O revenue per search (RPS) in each country for the first 18 months following initial implementation in that country;
• At full implementation (expected to occur within 24 months following regulatory approval), Yahoo! estimates, based on current levels of revenue and current operating expenses, that this agreement will provide a benefit to annual GAAP operating income of approximately $500 million and capital expenditure savings of approximately $200 million. Yahoo! also estimates that this agreement will provide a benefit to annual operating cash flow of approximately $275 million; and
• The agreement protects consumer privacy by limiting the data shared between the companies to the minimum necessary to operate and improve the combined search platform, and restricts the use of search data shared between the companies. The agreement maintains the industry-leading privacy practices that each company follows today.

The agreement does not cover each company’s Web properties and products, email, instant messaging, display advertising, or any other aspect of the companies’ businesses. In those areas, the companies will continue to compete vigorously.

Meanwhile, Google appears to be going full steam ahead on integrating semantic technologies into its search engine.   Google claims semantic search assumes not only that a search query is matched to the content of a particular web page, but that the meaning of the query is matched to the meaning of the website. This is going  to become a more and more  significant force as the internet matures and users become more demanding about their searches. As Jenny Kirby, head of search at i-ievel, says: “Google will have to enhance semantic capabilities: it needs better ways of interpreting user intent. That will require greater use of semantics.”

Kirby doubts any rivals will manage to beat Google to working out a successful form of semantic search. “When Google cracks it, it will do it so well and so extensively, it will blow everything else out of the water,” she says.

Rival search engine Ask boasts strong use of semantic search and an ability to understand what, where and why questions. This was enhanced with its relaunch last October.  And Ask promises that soon it will have the capacity to answer questions such as ‘Is EastEnders on tonight?’ and ‘What football games are on TV this weekend?’ The answers are provided through Ask’s ‘Direct Answer from Database’ technology.

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