Bing and Yahoo's 'Search Alliance': the experts' view

Yahoo has started the process of merging its UK search marketing accounts and search traffic into Microsoft's adCenter, so all search results and ads will now be delivered by Bing.

The migration, which is due for completion at the end of April, means the ad platform will now account for around 6% of UK search traffic.

In theory, this should make it a more attractive proposition for advertisers, but will it really have any impact on Google's dominance of the market?

To find out how the merger will affect marketers and what it means for the search industry as a whole, we asked four search experts for their views.

How will marketers have to adjust their strategy for keyword bidding?

Andreas Pouros, COO at GreenlightThe main challenge marketers are going to have to address is the actual merging of Bing and Yahoo accounts, and deciding which account structure they would like to continue with in the post-alliance period. 

I envisage most advertisers/agencies almost going back to basics and reactivating a number of the historically-poor performing campaigns and keywords with the hope, but perhaps not expectation, that the merger helps drive increased volumes of quality traffic.

Nigel Muir, MD at DBD Media:  The alliance will have relatively little impact on PPC search marketing strategy, certainly in the UK and Europe. We do expect it will affect campaign schedules more so, increasing the level of competition and bids slightly.

However, the alliance also affects organic search results, as Microsoft’s Bing will now power Yahoo natural results. Businesses will need to review their SEO strategy, and will need to develop a separate approach to SEO for Yahoo and Bing. We recommend that SEO marketers get familiar with Bing Webmaster Tools.

Andrew Girdwood, media innovations director at bigmouthmediaWhile marketers could still get great results from spending 100% of their budget with Google, I wouldn't recommend this approach - the Search Alliance offers a chance for incremental revenue that should be chased.

To chase this 'incremental' revenue, marketers should consider taking some of their worst performing terms from Google and trying them on the Search Alliance. 

If the Search Alliance proves to be a hit then this strategy of testing where budget is best spent may boil down to individual keyword bidding but that feels a long way off.

James Finlayson, account manager at Red or Blue DigitalThe major difference for marketers currently advertising over both systems will be the loss of 1p-4p keyword prices. 

For marketers only currently using one system, they'll need to consider the different demographics of each search engine and revise accordingly - words that bring virtually no traffic on one can generate worthwhile traffic on the other.

Microsoft says marketers will have to adjust their budgets to take into account the increased traffic. Does this basically mean prices are going to increase?

AP: We expect cost per click (CPC) prices to increase a little for the first quarter post migration, caused in the main by the fact advertisers will be having to reassess the bidding strategies they need to deploy to drive the best possible return. 

There is naturally going to be a learning period for all advertisers/agencies, which means a number of tests will invariably be conducted, including increased/decreased CPC bidding, generic keyword impression share, and day and time parting.

All of this is likely to have an impact on the spend levels across all accounts for a few months. 

NM: Bid prices may go up a bit, as the combined environment is likely to be more strongly competed in future.  

In the USA Microsoft's minimum bid price is 5 cents, whereas it is only 1 cent on Yahoo - which impacts some low competition and long tail keyword bids - but in the UK minimum bids on both engines are 5p, so there should be no impact on budgets in this respect.

Though traffic volumes are low, the quality of visitor and the ROI levels are often very good on both Yahoo and MSN. With the single adCenter interface, advertising on the alliance platform will be easier, and it should attract a larger slice of budgets. 

AG: What may happen is that there’s a boost of traffic while CPC stays the same, and this may result in overspend. While the Search Alliance rolls out in the UK search marketers will be well advised to watch their spends carefully.

This may not mean adjusting the budget as Microsoft and Yahoo will hope and may just mean spending the same amount of money over a shorter period of time.

JF: We're predicting a slight increase across the board due to increased competition. For those only using one system, their keywords should now be activated almost twice as much, but this can be managed through monthly budgets. 

With the loss of the super cheap keywords though you'll want to reconsider whether the ROI is still there when you're then paying the new minimum. 

Is this likely to have any impact on Google’s ad revenues?

AP: Potentially in the short term, due to marketers opting to allocate more of their monthly budgets to adCenter.

However, given the proven returns that advertisers have come to expect from Google, unless the alliance is able to deliver a significant increase in traffic and sales then I fully expect marketers to continue to invest the vast majority of their budgets in Google.

There is of course a risk that the alliance fails to deliver an increase in the quality of traffic marketers have been promised. If this happens, as many expect, then Google can actually expect to see an increase in revenues as a result of the merger. 

NM: Almost certainly not in the UK and Europe, as Google's market share is so significant. In the USA, where the alliance will have combined share of almost 30%, they may gain more traction, and could make a (small) dent in Google revenue.   

I imagine Google execs won't be losing too much sleep over this though.

AG: In the long term a successful Search Alliance will be good news for search marketing. Google generally benefits from growth in search marketing so it’s possible that even a successful Search Alliance will not stop Google.  

Areas like TV, radio or print may be the marketing mediums that suffer first.

The wildcard, however, is in-game advertising and on-demand video. Microsoft has an ace with the Xbox (and even the Kinect) as a growing number of people use the device to connect their TV to the internet.  

The potential there is huge and the Search Alliance is in a far stronger position to dominate than Google.

JF:  By simplifying the process of advertising on the Search Alliance's platforms it's likely to lead some who only use AdWords now to venture across, but ultimately this won't be a game changer.

What is the perceived benefit for Yahoo and Microsoft? Are they simply consolidating before one of them is potentially forced to fold? 

AP: The deal agreed means Microsoft pay Yahoo a percentage of the revenue generated from each search. In theory it seems like a perfect deal for Yahoo – allowing a global powerhouse like Microsoft to take the risk and challenge of taking on Google head to head and if Microsoft perform well, Yahoo do well.

For Microsoft, despite the level of investment put behind Bing when it first entered the UK market, they have failed to make any noticeable dent in the market share of Google. 

So by combining their own market share with that of Yahoo it instantly gives them more than double, thus arguably making them a more appealing alternative to Google for marketers.

If the alliance fails to deliver the traffic and sales for marketers then the revenue per search is likely to struggle, and therefore the likely party to lose out will be Yahoo. Microsoft are here to stay, whether the same can be said for Yahoo, I’m not so sure.

NM: Neither Yahoo nor MSN have been able to compete effectively with Google AdWords, both in terms of reach and in terms of the sophistication of their advertising platform and interface.  

A combined offering will reduce cost, and should allow for enhancements to the platform. It will also make it easier for agencies and direct advertisers to use the combined channel.

AG: The benefit to Microsoft is simply that they have a better chance at winning some vital market share points from Google.

It’s hard to underplay the importance of Microsoft evolving their business model away from just traditional desktop software. Microsoft has their eyes on the internet universe – on the Cloud.  He who controls the search, controls the universe.

The benefit to Yahoo is simply money. It is being watched closely by investors as it tries to get back in the game - this partnership gives Yahoo the chance to invest less in search and possibly earn more from it with Microsoft technology in place. 

JF: Many will see this as the last throw of the dice for Yahoo and Bing. There's no-doubt a huge amount of consolidation going on behind the scenes making each able to react quicker and more successfully to future moves. 

The search strength of Yahoo and Bing both lie abroad - and it's in these alternative markets where the merger will provide a strong force to bring relevance to the search engines as an advertising platform.

What does the merger mean for Yahoo’s future as an independent search engine?

AP: Yahoo still controls the rest of the inventory across their portals, it is only the search results that are now controlled by Microsoft, so in reality they still have a huge amount of control over their long term destiny. 

From a pure search perspective though, I feel they have tried to take the fight to Google only to realise that they are a featherweight turning up in the ring to compete against a five-time heavyweight world champion. 

Arguably they have done the sensible thing – let their mate get in the ring for them, while they duck out the back door to pick a fight against someone they can beat – which is likely to be traditional display advertising.  

NM: Yahoo started as a directory, rather than a search engine. It has evolved to become a significant player in the display marketplace, whereas over time its influence and importance in the search engine field has declined.  

Its future as a search engine has been pretty bleak for a long time, and the alliance may well serve to hasten the end of Yahoo's independence.

AG: Yahoo is no longer an independent search engine. It's not locked into the deal forever though, and there are break clauses for poor performance. 

However, even if Yahoo wanted to return to providing its own search engine it would have to choose between starting from scratch or trying to build on obsolete technology.

JF: Right now it seems it's all one-way traffic between Yahoo and Bing. Yahoo still has considerable strengths in other markets - Yahoo Answers for example - but until their new CEO can set a positive and clear direction for the company, all bets have to be against it's future as a search engine.


Topics: Advertising Search Marketing
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Reader comments (2)

  1. Linus Gregoriadis Linus Gregoriadis Staff

    Research Director at Econsultancy

    1:13PM on 27th February 2012

    Worth mentioning here that our 2012 UK Search Engine Marketing Benchmark Survey is now live, until 22 March.

    The survey includes questions about the Search Alliance. As usual, those taking part get a free copy of the full report.

  2. Avatar-blank-50x50 Random Guy

    3:44AM on 8th December 2012

    Cool story bro. (>^_^)>

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