Yahoo and Microsoft Again

I have been trying to avoid this issue for quite sometime. Although the impact of the two collaborating on search will affect the Web development and Web hosting world , it seems to me that there are quite a few pundits and journalists out the who have already covered this at length.

However, I think some of them are looking only at the service of the deal and not at the some of the additional benefits to Microsoft or Yahoo (especially Yahoo since their stocks plummeted).

Wall street was very disappointed with the deal since Yahoo doesn’t get any cash up front, but I think it should be known that Yahoo didn’t loose anything therefore didn’t really sell anything therefore not getting a paycheck at the beginning is inconsequential. What they received was a partnership with Microsoft. Microsoft will outsource their search engine and advertising technology to Yahoo. Microsoft gains additional traffic, Yahoo can free up resources for use elsewhere.

A bigger audience doesn’t just mean that Microsoft and Yahoo will gain money through advertising, what it also means is that Microsoft can garner valuable research and can even use Yahoo (or perhaps Bing since Bing will have the smaller audience) as a test bed for developing new search features. Realistically, Microsoft and Yahoo know that this deal won’t unseat Google as the number 1 search engine juggernaut, but what it does do is give both companies the ability to become more competitive down the road.

Yahoo, for instance, can take the money they were using before for search engine R&D and move it into developing tools, APIs, platforms for their user base, etc. Or, they could use that money to research a better search engine without being under the gun to release new updates to the public. 10 years down the road when the partnership ends Yahoo would then have a search engine platform with 10 years of R&D in it. They could also simply pocket the money, save on the expense to increase their profits.

This is not some scheme to try to get number 1 in search engines quick. This is a long term strategy for mutual improvement of two companies in hopes of the eventually unseating of Google as the king of search engines.