Can Microsoft-Yahoo challenge Google?

Marketplace Staff Jul 29, 2009

Can Microsoft-Yahoo challenge Google?

Marketplace Staff Jul 29, 2009


Kai Ryssdal: We went looking for what else this deal might mean for the two companies and for Google, their mutual competition. We tracked down Ina Fried. She’s a senior writer with CNET Ina, good to have you with us.

INA FRIED: Thanks Kai.

RYSSDAL: So Microsoft and its new search engine Bing get market share out of this, right. What else do they get?

FRIED: Well, they get market share in terms of business scale, but also in terms of they get to see a lot more of the questions being asked on the Internet. One of the challenges in the search business, which makes it hard to rival Google, is actually the more traffic you get, the more you know, the better search engine you can build. There’s sort of one of those virtuous circles to co-opt a business term here.

RYSSDAL: In other words, it’s all about the algorithm right? It’s all about that search mechanism.

FRIED: Right, both on the algorithmic, or sort of the search results you want. Plus on the paid search it’s sort of the same thing. Advertisers are willing to pay more for bigger search engines, which means that Google makes more per search in addition to having more searches which helps them feed their engine. And basically both Microsoft and Yahoo need a bigger engine.

RYSSDAL: All right, besides the bigger engine though what does Yahoo get out of this. Since they’re not really doing search anymore, their own search.

FRIED: Well, they get a lot of the revenue for all the searches that will continue to be done on Yahoo’s site. They’re going to get 88 cents out of every dollar. And they don’t have to spend the big bucks that it takes to constantly crawl the Web to keep trying to catch up with Google. So they get to basically use their resources elsewhere while still getting a lot of money. Don’t forget Yahoo has about twice the search volume than Microsoft has right now. So Yahoo will actually be getting more revenue from search than Microsoft for the time being and some time to come.

RYSSDAL: There is a customer habitually question here, right? I’m a huge Google user, I’m not likely to shift over to either Bing or Yahoo. How do you get people to break that habit and make Microsoft and Yahoo some money?

FRIED: It’s such an interesting question because in the one sense there is really no barrier to entry in that it’s just as easy, one character shorter, two characters shorter, to type in Bing as it is Google. But as you point out it takes something significantly better to make you switch. And when we all switched from Yahoo to Google, or at least most of us did, it was because Google was much better. And I think that’s still the bar in terms of really attracting significant usership.

RYSSDAL: Well, what is about Bing that might make it competitive?

FRIED: So right now they’re better in a few key areas. They have some interesting technology in travel search, where you can not only find a flight, but it’ll tell you if prices are likely to go up or down. They have some interesting things in both health search and product search. But it’s not necessarily the kind of thing that’s going to make you go, wow, this is so much better. And that’s the challenge. They’ve been focused on first catching up and then being a little bit better. But I think the bar is actually they have to be a lot better to really get people to switch.

RYSSDAL: So at the end of the day is this really a competitor to Google, or is it just a convenient way for Google to be able to say, Hey, you know what, there’s somebody else out there, it’s not just us, we’re not the big, evil empire. And Microsoft and Yahoo can fight the good fight.

FRIED: Well, it is the biggest potential challenge to Google and search. But they still got a long way to go. Even combined they’re less than half the size of Google. It’s a more formidable competitor, but they’re still a huge underdog when it comes to Google.

RYSSDAL: Ina Fried, staff writer at CNET. Thanks a bunch.

FRIED: Thanks Kai.

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