Laser Burn Media

Yes, by now it’s old news.  Yahoo and Microsoft have announced a partnership that is meant to help both companies become more competitive in the online Search and Advertising industries.  The deal, in which Microsoft will utilize Yahoo’s advertising sales force and technology and Yahoo will take advantage of Microsoft’s Bing search technology, has been in the works for a long time now.  And while most analysts seem to think that the partnership will help make both Yahoo and Microsoft more competitive, Google remains, by far, the most dominant player in both the Search and Online Advertising worlds.

What’s interesting about this deal, I think, is how it has affected Yahoo’s stock price.  While both Yahoo and Microsoft have said that this deal will help both companies become stronger players in the Search and Advertising industries, Yahoo’s stock price has dropped like a rock since the deal was announced.  Things got so bad that Microsoft’s CEO, Steve Ballmer, has has come out trying to talk up Yahoo and try to stop the blood loss.  At a gathering of financial analysts and reporters, hosted at Microsoft’s headquarters yesterday, Ballmer tried to reassure everyone that this deal will make Yahoo a stronger company.  As reported by the New York Times…

“Nobody gets it,” Mr. Ballmer said Thursday to a gathering of financial and industry analysts at Microsoft’s headquarters.

Yahoo’s shares have plunged since the deal was announced. The stock fell 12 percent on Wednesday and another 3.57 percent on Thursday, closing at $14.60. Meanwhile, Microsoft’s share price has held steady, reflecting the perception of investors that Microsoft got the better end of the bargain.

“I was myself kind of surprised by the market reaction,” Mr. Ballmer said at the analyst meeting. “It’s a win-win deal.”

Mr. Ballmer went to great lengths to explain how beneficial the deal is for Yahoo. For example, Yahoo will receive 88 percent of the revenue that comes from search ads sold on its sites. “We will not make much,” he said.

Mr. Ballmer’s comments, which came during market trading Thursday, did little to stem the slide in Yahoo’s shares.”

It’s clear that this deal is not at all what many Yahoo shareholders were looking for.  That being said, this deal is a pretty level headed, win-win partnership.  It will allow Microsoft to focus on building and strengthening its Bing.com search technology and allow Yahoo to focus on selling online advertising.  What this means for Online Marketing professionals is that 1.) Search Engine Optimization efforts must now pay more attention to Bing and how it determines a website’s rellevence and 2.) Be prepared to pay a little bit more, probably not much more, for placing ads with Yahoo.  Overall, though, this deal doesn’t appear to be much of a world changing event.  Additionally, many of the finer points of this deal have yet to be hammered out.

And while this deal will probably undergo some sort of Government scrutiny to determine if it running afowl of US Anti-Trust laws, most experts beleive that it will be allowed to go through.  The fact of the matter is that Google dominates both the Search and Online Advertising industries, owning more than half of the market share in each of those industries.  It’s hard to imagine how either Yahoo or Microsoft could ever hope to take on Google without some sort of partnership.  If anything, this deal puts more competitive pressure on Google, which, in the end, will probably mean that the deal will go through.

Obviously, Laser Burn Media is keeping a close eye on this situation and will continue to monitor it to try and better understand how it will affect the Online Marketing and Online Search industries.  As more details of this deal are released, and as new developments take shape, we will be sure to keep all of you up to speed.  All for now.

-Dan Cheek and John Botch
www.LaserBurnMedia.com
Dan@laserburnmedia.com or John@laserburnmedia.com