Long Term, The Microsoft-Yahoo Deal Could Benefit Consumers

Fri, Jul 31, 2009 at 11:18 am

    My phone started ringing at 5 a.m. Wednesday and didn’t stop until nearly midnight. The calls were mostly from CBS radio stations seeking an explanation of the just-announced Microsoft-Yahoo relationship.

    The factual questions were easy to answer. Yahoo would begin using Microsoft’s newly developed Bing search engine instead of its own homegrown search engine. Yahoo would sell advertising on both Yahoo and Microsoft search properties, with Yahoo getting 88 percent of the revenue. Microsoft would grow its dismal 8 percent search market share by adding Yahoo’s 20 percent share and, if all goes well, move up from there.

    Google currently has 65 percent of the search market. Microsoft and Yahoo have promised businesses a more competitive environment which, they say, should lead to less expensive and more effective advertising opportunities.

    But the inevitable next question was a lot harder to answer: What does this mean for consumers?

    Frankly I’m not sure. In the short run, I don’t think it will mean much at all. Based on what Yahoo CEO Carole Bartz and Microsoft CEO Steve Ballmer said in a press conference, the deal should result in better search quality because Microsoft will apply some of its Yahoo-generated revenue toward improving search. Perhaps even more important than pouring money into search, increased usage means more data on user preferences, which helps refine search algorithms.

    Yahoo has already revamped its home page with some cool new features, including a "My Favorites" column on the left side that gives you instant access not only to Yahoo sites but your Facebook account, Gmail and lots of news sites. Yahoo is pre-configured to work with about 65 sites, but you can easily add more by entering their Web or RSS feed addresses.

    I like the new page and am getting into the habit of using it as my gateway to Gmail, stock quotes and news sites I follow. But one feature I never use on the Yahoo home page is the search box that’s front and center. Like many others, I’ve simply gotten out of the habit of using Yahoo for search. I "Google" things.

    If Yahoo and Microsoft can convince people that the search box on the top of Yahoo’s home page will bring them better results than Google, it might encourage people to make Yahoo their home page as their gateway to search, Facebook, Twitter, e-mail and everything else. For Yahoo, that would not only mean more search revenue but also more display advertising money. For consumers it could mean a better experience.

    Microsoft’s Ballmer has argued that by combining a weak No. 2 in search (Yahoo) and an even weaker No. 3 (Microsoft), competition against a dominant Google will increase, benefiting consumers. As self-serving as that argument may be, he has a point. Because of its dominance, Google rules not just when it comes to advertising rates but also in the way Web sites are promoted.

    Having another strong player in the search arena could help break Google’s stranglehold on search engine Web site rankings. I’m not sure how Microsoft’s Bing determines what sites come up first, but having more than one arbiter of that important process would be a good start.

    Currently, where a site comes up in a Google search can have a life and death impact on its ability to draw visitors. Google has a system based on algorithms and called "PageRank" that decides the order of sites that pop up in response to a search. "Pages that we believe are important pages receive a higher PageRank and are more likely to appear at the top of the search results," Google explains on its corporate Web site. This gives the company incredible power in the marketplace.

    Finally, there is the privacy issue related to the Microsoft-Yahoo deal. In an interview, John Simpson of Consumer Watchdog raised concerns about how users’ personal data is collected, stored and shared.

    He’s worried about "up-until-now separate databases being merged and used in ways that haven’t been made explicit." Simpson hopes to see Microsoft and Yahoo come up with a data retention policy that expunges personal information in about a month and says that, by default, they shouldn’t collect behavioral information unless consumers opt-in.

    Contact Larry Magid at [email protected] Listen for his technology chats on KCBS-AM (740) weekdays at 3:50 p.m.

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