I’ve been writing and talking to various people about the Microsoft-Yahoo! outsourcing deal in search. My operating assumption is that the deal will ultimately be approved by regulators, but it isn’t a slam dunk. A similar, and less expansive, deal was not approved between Google and Yahoo! last year. One could argue in responses that Microsoft and Yahoo! are in very different positions in the search market and that’s a material difference.
There’s also not been a widespread outcry from advertisers objecting to the MicroHoo search combination as “monopolistic,” as there was in the case of Google-Yahoo! (partly that was the result of lobbying behind the scenes). But what if regulators don’t allow MicroHoo to go through in the end because of the same concerns about market and pricing competition?
This scenario prompts Danny Sullivan to ask What’s Yahoo’s “Plan B” For Search?
It’s not clear the company has one. It continues to say that it will invest in search in terms of the user experience and interface. But the plan between Redmond and Sunnyvale sees many of Yahoo!’s remaining search engineers shifting to Microsoft; many have already left on their own to go elsewhere or been hired by Microsoft independently.
One of the reasons that Yahoo! did the deal with Microsoft, beyond investor pressure, is that it simply saw the back end of search and related R&D as being too expensive to maintain. But there is a chance that it will be forced to answer the question “What now?” if the US DOJ or the Europeans step in to block the deal or ask for significant modifications.
Investors didn’t “get” or like the MicroHoo deal very much (at least initially) because there was no obvious gain on Yahoo!’s part: no “lump sum” cash payment and so on. Microsoft appeared to the market to be the big winner. I continue to believe that the MicroHoo deal will happen but it’s worth asking what if it doesn’t? For one thing, if it didn’t, you’d see investors punish Yahoo! shares (much more than they would Microsoft’s).
What about you? What do you think will happen and what would you do if you were Yahoo! and the Microsoft deal were blocked?
Related: Kara Swisher at AllThingsD reports on a forthcoming and “massive” new ad campaign from Yahoo! around the theme “your home on the Web.” If that’s correct I think it’s not a bad concept: trusted brand, starting point, organizing tools, etc.