Page last updated at 12:25 GMT, Monday, 4 February 2008

Searching for the next big thing

By Jonathan Fildes
Technology reporter, BBC News

Google logo seen through man's glasses
Google currently dominates search in most markets
The world of search could be facing its biggest shake-up since the arrival of Google.

Last week Microsoft launched a bid to take over Yahoo.

The software firm offered $44.6bn (22.3m) for Yahoo, one of the stalwarts of the commercial web since its inception.

The two firms have many potential synergies in their services, such as their webmail offerings.

But for many observers, a combination of the two companies search offerings could be the most interesting outcome.

"The key measure of success in three years time is whether they will have made any progress in fending off - and catching up to - Google," wrote Charlene Li, principle analyst at Forrester Research.

According to Nielsen online, Google has a 56% share of the search market in the US, compared to 18% for Yahoo and 14% for Microsoft's Live facility.

So even a combined service would still only account for around half of all of the searches done of Google.

"The reality is that no one's going to get near Google's search share over the next few years," wrote Nate Elliott, analyst at Jupiter Research.


In Europe, the situation is even more acute.

According to figures from research firm Comscore, Google has 80-90% of the search share in many European markets.

If it goes ahead, the Microsoft and Yahoo merger would be one of the major events in the history of the internet
Alex Burmaster, Nielsen Online

"Whether this deal happens or not, it'll be incredibly difficult for anyone to compete with Google for European search share," said Mr Elliott

However, he says, a joint offering could compete in other ways.

"A combination of MSN and Yahoo would definitely be better-positioned to compete with Google for paid search revenues than each company is now."

Many European firms do not bother advertising with anyone but Google because other search engines do not have the reach, he wrote, but a combined offering could change that.

"[Microsoft and Yahoo] would still have less than 10% search share in the big European markets...but it would at least give marketers a reason to run trials beyond Google," he wrote.

1. Google Search
2. Yahoo Search
3. Google Image Search
4. MSN/Windows Live Search
6. AOL search
7. Google Product Search
8. My Web Search
9. Microsoft Search
10. AltaVista

Source: Nielsen Online

Alex Burmaster, an analyst at Nielsen Online also believes that advertising is where Microsoft and Yahoo can hit Google hardest.

"If it goes ahead, the Microsoft and Yahoo merger would be one of the major events in the history of the internet," he told BBC News.

"They could be positioned to create the next generation of ad networks - one that rivals Google/Doubleclick."

Google has agreed to buy web-advertising network Doubleclick for $3.1bn (1.6bn) but the deal is still under scrutiny by regulators.

Social search

Mr Burmaster, believes any Microsoft-Yahoo ad network could run across all of the companies' platforms such as mail and social networks.

"Advertisers could maximize their buys over two of the most trusted online brands," he said.

He also believes how they will take advantage of social networks will be key.

Microsoft already serves up ads for popular networks such as Facebook and bought a stake in the firm last year.

Yahoo owns other key social media sites such as Flickr, Delicious and Yahoo Answers.

"The proposed transaction itself would give Microsoft one of the industry's strongest portfolio's in the growing social-media space," said Mr Burmaster.

The challenge then would be leveraging that audience and those services to begin to compete with Google.

But Ms Li does not believe the search giant will take the challenge lying down.

"In the very long term (3 years+), there's a chance that a revitalized company would be in a better position to compete," she said. "But this assumes that Google stands still for them to catch up."

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