The looming Microhoo disaster rises again
With the collapse of the advertising revenue deal between Yahoo! and Google, the spectre of the Microsoft and Yahoo! merger has risen again from the dead deals of the past. Investors are, as I write this, already speculating about renewed merger talks between the two companies. Stockholders like Carl Icahn are hoping to cash out of Yahoo! before it loses any more value. That attitude means that there is no “buy and hold” or long-term valuation in Yahoo! stock. To Icahn, Yahoo! is just a commodity, a poor investment, and all he wants is to salvage as much money as he possibly can.
However, Microsoft has already way outstripped Yahoo! in terms of real search-related traffic. The Live Search brand has become the second most visited search resource in the world, and that is nothing to negotiate away in a possible merger (would Microsoft sacrifice its own brand to preserve the older, more prestigious Yahoo! brand?).
For search marketers, the prospect of a merger between these two companies is anything but promising. Today we have three main pay-per-click and organic search providers: Google, Live, and Yahoo!. Each service caters to its own unique demographics and despite all the hoopla over Google many people report better conversions from their Microsoft and Yahoo! PPC campaigns than from their Google campaigns. For those people, the merger of the Microsoft and Yahoo! brands would spell disaster, because one of their profitable demographics would simply vanish.
Microsoft has indicated in the past that it wants to rape Yahoo!’s braintrust, drawing all the Yahoo! search engineers over to the Microsoft campus, where they would presumably work on Live Search. That means the Yahoo! search brand would be semi-retired along with the Altavista and AllTheWeb. No one is developing the old technologies those search engines once relied upon. You can bet that Yahoo!’s hybrid technology, certainly capable of challenging Google for relevance, won’t be maintained (unless it’s rebranded as Live Search technology).
Microsoft’s current search engineering staff (very capable programmers) will be demoralized once more. Some have already jumped ship. They are not happy about being underappreciated by their own CEO (who seems oblivious to the incredible achievements they’ve made in taking their service to the number 2 position WITHOUT a merger).
A merger between Yahoo! and Microsoft will temporarily boost (in an artificial manner) Microsoft’s perceived and real search market shares. But as people lose faith in the Yahoo! brand they’ll abandon the Yahoo! search services like rats fleeing a sinking ship. We’ve already seen this happen with other search services that were absorbed into other search services.
For search optimizers, the loss of Yahoo!’s brand and traffic from the market means that our efforts to compete for search referral traffic will become more focused on two search engines: Microsoft and Google. With more people competing for top positions on those services, the inevitable fallout will force companies to either rebrand themselves or to abandon search marketing altogether.
Rebranding is not easy to achieve, mostly because corporate executives just don’t get search. They think they have to rank number 1 for 1-word queries. They don’t know what the long tail of search is or how it can benefit their brand value and drive search referral traffic to their sites. Some SEOs are good at pointing out the increased traffic they bring to clients, but not every client will be satisfied with increased revenues. They want to rank 1st for stupid queries.
When you could get someone to rank 1st on Microsoft or Yahoo! rather than Google, that was at least a consolation prize for misguided egos. It also helps to rank better on any search engine. The number 1 slot effect works everywhere, not just on Google.
1/3 of our options may simply disappear within the next 12 months because investors like Carl Icahn don’t understand how the search market works. He’d rather take a loss right now than bet on developing a new technological approach to search. One has to ask why Icahn invested in Yahoo! in the first place.
I suppose this is all more a result of the current economic crisis than anything else. Icahn’s self-imposed stupidity is certainly not looking any different from the panic that caused investors throw away all the value they had accumulated in the stock market over the past few years.
Think about it. If people had NOT starting selling off their stocks when the banks began freezing credit, where would the stock market be today? However, the stock market is constantly playing a complex Prisoner’s Game. Investors don’t trust each other enough to keep their money in the market, so as soon as one investor begins acting selfishly they all do, and everyone gets hurt (in the Prisoner’s Game, this would be equivalent to both criminals ratting the other out, so they both go to jail).
The search market is not just a corner in the planetary economy. It’s also a sensitive ecosystem that cannot easily absorb the shocks of lost resources. It will take time for people to adjust to the loss of either the Microsoft or the Yahoo! brand and technology.
Of course, the loss of a major search engine will open up an ecological niche. Someone else will have the opportunity to become the third search engine behind Microsoft. Maybe that will be Snap or Ask. It’s too soon to day. Ask seems to have done everything possible to NOT be a search engine, even more so than Yahoo!. Where Yahoo! told the world “we don’t mind being the number 2 search engine”, Ask pretty much said, “We just want to be a niche market search engine”.
If you’re looking for a major competitor, someone to challenge Google, you need someone like Steve Ballmer who says, “We’re committed to building our search market share over the next five years”. That’s a realistic time frame. It’s a pity the guy just doesn’t understand and appreciate what he’s already accomplished without damaging the search industry.
There are hungry small search engines sniffing around the edges of the core market, hoping for a chance to grab some of the demographics that are about to melt. Unfortunately, except for Cuil, all the other new contenders have failed to deliver on their promises. We’ll know if Cuil can make advances within the next six-to-twelve months. In the meantime, Hakia, Wikia, ChaCha, and all the other “new” search engines just haven’t attracted any real interest.
The last time the search engine industry went through this kind of contraction, Yahoo! was on top and its competitors melted away. But there was an aggressive young search engine that came charging out of the shadows to slowly eat away at Yahoo!’s dominance: Google.
Today, if there is anyone poised in the shadows, ready to start nipping at Google’s heels, they are not yet on our radar.
Time will tell. But as we watch the continuing drama of the Microhoo disaster unfold, search engine optimizers need to start developing strategies to compensate for the loss of a major search brand and resource. We probably have a year, maybe 18 months before the market collapses. In that time we could collectively influence the growth of a new third search engine. We could also optimize traffic building strategies for dozens of other search engines (Xenite.Org receives traffic from around 60 search services every month) to replace the lost traffic.
Optimizers who ignore the dynamic changes in the search market will leave themselves vulnerable to competitive end-runs. The new SEO case study model will focus not on how many referrals from Google a site receives but on how many trackable search referrals a site receives. What will you do when your clients come to you and ask, “Why aren’t you getting us traffic from those other search services the way your competitors do for their clients?”
The only way to turn this looming lemon of a merger into lemonade is to leap ahead of the SEO community in developing alternative search referral traffic sources before it becomes imperative for everyone to do so.
www.seo-theory.com
published @ November 6, 2008