What’s really behind Microsoft’s proposed takeover of Yahoo?

A long time ago, in another galaxy far, far away (1997), before there was a popular engine named ‘Google’ there was a search engine called GoTo.com. gotologo1.gif GoTo was one of the dot-com’s that idealab! idealab_logo.gif started in the early days of the internet, pre-March 2002 meltdown. GoTo occupied office space right next to the lab where I was working at the time, in young and fashionable downtown Pasadena. A lot of people scoffed at Bill Gross’ notion of using a bidding mechanism for advertisers within a web search engine when you entered a search term. The notion that you could ‘buy’ your ad placement to be displayed when users searched for something was totally out of line with the norm of the time. AltaVista, Lycos, and the other big search engines that dominated the landscape then did NOT use this new-fangled algorithm that GoTo adopted to allow what amounted to a virtual bidding war in a cloud for the top spot where your ad was seen when you searched for ANYTHING. GoTo basically did a ‘branding’ act for its first year. Didn’t really have too many advertisers and no one really looked at what they were doing seriously. Then, to increase its mass, it landed a deal with then search giant database Inktomi in June of 1998. Now when a user searched for something, many more listings would appear and many more paid listing could appear as well. In the summer of 1999, they offered an online set of tools for advertisers. These tools allowed advertisers access to keyword bidding and basically was a switch from a system that required reps to sell space to a self-serve model online (sounds a lot like Google huh?). In 1999, GoTo went public and later that year changed its name to ‘Overture’ overturelogo.gif . The rest you can probably guess. In 2003, Yahoo bought Overture for $2.2 billion. Then, Overture bought AltaVista, AllThe Web and FAST adding to its number of pages crawled or searched. Yahoo/Overture and Google now had the lions share of the search business. And that’s the way its been. Unless the Microsoft deal goes through. You can see that combining MSN Search with Yahoo/Overture (Yahoo Search Marketing) would vault MS to second place in the search biz and puts the combined entity a lot closer to Google’s share of the search market quicker than nif they tried to grow thier share over time online. Here are some stats from ComScore just last November:

November U.S. Core Search Rankings

In November, Google Sites share of core searches stood at 58.6 percent, virtually the same level as in October. Yahoo! Sites ranked second with 22.4 percent, followed by Microsoft Sites (9.8 percent), Ask Network (4.6 percent) and Time Warner Network (4.5 percent), which had the largest share point gain during the month (up 0.3 points).

comScore Core Search Report*
November 2007
Total U.S. – Home/Work/University Locations
Source: comScore qSearch 2.0

 
 
 
 

Core Search Entity

Share of Searches (%)

 

Oct-07

Nov-07

Point Change Novt-07 vs. Oct-07

 

Total Core Search

100.0%

100.0%

0.0

 

Google Sites

58.4%

58.6%

0.2

 

Yahoo! Sites

22.8%

22.4%

-0.4

 

Microsoft Sites

9.8%

9.8%

0.0

 

Ask Network

4.7%

4.6%

-0.1

 

Time Warner Network

4.2%

4.5%

0.3

 

* Based on the five major search engines including partner searches and cross-channel searches. Searches for mapping, local directory, and user-generated video sites that are not on the core domain of the five search engines are not included in the core search numbers.

That’s the golden fleece that MS wants from the Yahoo deal. Sure, part of it is the traffic, but the real crown jewel is paid search. Bill Gross got the last laugh. Congrats Bill!

(logo courtesy of AdAge)  mycrosoft-logo020108.jpg

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