Is Microsoft the winner in the Yahoo deal?

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“For Microsoft, the deal is a positive indication that it’s investment in search and launch of Bing in June will pay off,” he said.

“While no solid marketshare numbers have surfaced, Microsoft has created positive momentum and it’s that traction that gave Yahoo the indication it would need to invest heavily in search to remain competitive with Google and Microsoft,” he added.

Ovum’s Davis added that customers and the sector will win either way. “The now bitter rivalry between Google and Microsoft should ensure that improvements to the functionality and usability of the respective search engines will continue apace,” he said.

Should Google be worried

Bing was never a ‘Google killer,’ according to David, who added that the addition of Yahoo’s customers could give Google a “serious run for its money” as the deal lets both firms play to their strengths.

“Both companies are playing to their core competencies: Microsoft to the technology and Yahoo to its domain knowledge in advertising and media,” he said.

Gartner’s Weiner said Google’s AdWords faces stiff competition from Microsoft’s AdCenter. “AdWords users may now find AdCenter to be a more competitive option, especially in categories where Microsoft has focused Bing’s development like travel and retail, while premium brands and agencies may now find Yahoo to be more capable of supporting brand campaigns with integrated search and search-related targeting capabilities,” he said.

Weiner added that Microsoft has made a “pincer move”, using its own AdCentre to take on one front, while Yahoo takes the high-end premium advertising front. “In other words, this sharpens the distinction between Microsoft’s ‘technology company’ role and Yahoo’s ‘media company’ role, making it harder for Google to play both against their alliance,” he said.

He expects Google will use data protection as a possible issue in any regulatory challenge the web firm raises to the deal.

“The fly in that ointment remains the privacy issues that will impede the flow of search data between the two companies, Weiner added.

“Watch for this issue to escalate in the inevitable challenge from Google.”

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