Microsoft steps up search assault on Google

Microsoft's assault on search engine leader Google took a major step forward yesterday as US and European regulators cleared the software company's search partnership with Yahoo.

The 10-year deal, struck last July, is the biggest effort yet by Microsoft to establish an online business to rival Google, an area where Microsoft has lost $5 billion (£3.2 billion) over the last four years.



"Microsoft really has room to throw money at this," said Kim Caughey, senior analyst at Fort Pitt Capital Group. "I think it can work. If they can make inroads in specific target areas, they could have something positive to report."



Microsoft has already made some progress with its search engine, Bing, picking up 3.3 points of market share since its launch last June. But Bing is not likely to "push Google off a very big pedestal any time soon," said Caughey.



The battle for online search ads is only one front on a sprawling war for revenue between Microsoft and Google, which also encompasses operating systems and mobile phones. But neither has yet managed to compete on equal terms in each other's core market.



"In terms of our modeling, we really don't see any impact from Microsoft-Yahoo on our Google numbers," said Clayton Moran, an analyst at The Benchmark Co.



"It doesn't change much in terms of the competitive dynamics of the industry right away," he warned. "From a Google perspective, looking out over the next couple of years, it's a nonevent."



The deal, cleared unconditionally by the Department of Justice and the European Commission on Thursday, is not expected to impact Microsoft's bottom line, but could lay the foundation of a profitable online business.



"Really now, the goal is about share gain. If we grow share, we will grow our way into profitability, and we have confidence we can do that," said Microsoft's Yusuf Mehdi, who is charged with making Bing and the MSN portal a financial success, in an interview with Reuters earlier this month.



Microsoft shares rose 1.2 per cent and Yahoo's rose 0.7 per cent on Nasdaq, in a broadly higher tech market.



The Justice Department's Antitrust Division said the deal was unlikely to substantially lessen competition.



US market participants had expressed support for the partnership as a way to create a more viable alternative to Google, the division said in a statement issued late Thursday.



Google, which did not oppose the partnership, did not comment specifically on the regulatory approval but said that there has always been "robust" competition in the search ad business. Its shares rose 1.1 per cent.



The deal means Bing becomes the search engine for Microsoft and Yahoo sites, while Yahoo focuses on attracting big advertisers.



Microsoft will handle the automated auction of search ads for use on both companies' sites, and pay Yahoo a portion of search ad sales generated on Yahoo pages.



Microsoft is hoping that by making itself a single conduit for advertisers to access customers on both sites, it will become a credible alternative to Google.



Last month Yahoo handled 17 per cent of US internet searches, while Microsoft took 11.3 per cent, according to comScore. Theoretically, that would now give Microsoft over 28 per cent of search traffic, against Google's 65.4 per cent.



"At 30 points we are now a credible option, so that number matters," said Mehdi earlier this month.



Globally, Google is even more dominant, with 90 per cent of the search market compared with 7.4 per cent for a combined Yahoo and Bing, according to November data from Web research firm StatCounter.

The Microsoft-Yahoo deal was broadly expected to gain approval, but some had thought the companies might have to alter the deal's terms.



The partnership took months to hammer out last year. It followed Microsoft's aborted $47.5 billion (£30.8 billion) Yahoo takeover attempt the year before. Google abandoned its own advertising deal with Yahoo in 2008, which Microsoft opposed, under pressure from the US Justice Department.



Approval means Microsoft can begin the task of putting its Bing search engine into Yahoo sites. Neither company has laid out exactly how Yahoo's new search pages will look, but they will essentially be Bing searches with some customization of results by Yahoo.



The companies aim to get the partnership fully operational in the United States by the end of this year, with the transition of advertisers taking place before the holiday shopping season, if possible. The partnership should be globally complete by early 2012.



The deal had already been cleared by regulators in Australia, Brazil and Canada, but needed US and European approval to take effect. The companies said they are still working with regulators in Korea, Taiwan and Japan.

News
people
News
Ed Miliband received a warm welcome in Chester
election 2015
Life and Style
Apple CEO Tim Cook announces the Apple Watch during an Apple special even
fashionIs the iWatch for you? Well, it depends if you want for the fitness tech, or the style
News
Astronauts could be kept asleep for days or even weeks
scienceScientists are looking for a way to keep astronauts in a sleeplike state for days or weeks
Life and Style
ebookNow available in paperback
ebooks
ebookPart of The Independent’s new eBook series The Great Composers
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Gadgets & Tech

    Recruitment Genius: Project Implementation Executive

    £18000 - £23000 per annum: Recruitment Genius: They work with major vehicle ma...

    Recruitment Genius: Digital Account Executive - Midlands

    £18000 - £26000 per annum: Recruitment Genius: They work with major vehicle ma...

    Ashdown Group: Front-End UI Application Developer

    £30000 - £40000 per annum + Benefits: Ashdown Group: Front-End UI Application ...

    Recruitment Genius: Digital Account Executive

    £18000 - £26000 per annum: Recruitment Genius: They work with major vehicle ma...

    Day In a Page

    NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

    Who's monitoring the outsourced NHS services?

    A report finds that private firms are not being properly assessed for their quality of care
    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
    How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

    How do Greeks feel about Syriza?

    Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
    From Iraq to Libya and Syria: The wars that come back to haunt us

    The wars that come back to haunt us

    David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
    Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

    Too busy to surf? Head to The Pool

    A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
    Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

    UK's Major Tum to blast off on a spice odyssey

    Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
    John Harrison's 'longitude' clock sets new record - 300 years on

    ‘Longitude’ clock sets new record - 300 years on

    Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
    Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

    Let the propaganda wars begin - again

    'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
    Why Japan's incredible long-distance runners will never win the London Marathon

    Japan's incredible long-distance runners

    Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
    Why does Tom Drury remain the greatest writer you've never heard of?

    Tom Drury: The quiet American

    His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
    You should judge a person by how they peel a potato

    You should judge a person by how they peel a potato

    Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
    Beige is back: The drab car colours of the 1970s are proving popular again

    Beige to the future

    Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
    Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

    Bill Granger cooks with fresh cheeses

    More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
    Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

    Shay Given: 'This FA Cup run has been wonderful'

    The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
    Timeless drama of Championship race in league of its own - Michael Calvin

    Michael Calvin's Last Word

    Timeless drama of Championship race in league of its own