So, Microsoft and Yahoo! have taken another step closer to striking a deal – but what does this mean for us?

Yahoo! was once a dominant force, perhaps even the de facto name, in the search engine business and whatever you may read, it’s still going strong, second in fact behind Google. That sounds pretty impressive until you see that Google has over 85% of the global search engine market and the other search providers need to constantly vie for the remaining 15%.

The remaining 15% is primarily split across Yahoo (around 6%), Microsoft Bing (around 3%), Chinese search engine Baidu (around 2.5%), Ask (0.62%), and AOL (0.47%) -  Source NetMarketShare (January 2010).

So why would Microsoft be so keen to partner with Yahoo! apart from adding around another 6% to it’s search engine market share (bringing it up to just over 9%) ?

In the US, market analysis and research business, comScore rated Google, in June 2009, as having 65% of the search engine market share, with Yahoo! close behind with 19.6%, with the others primarily made up of Microsoft related sites (8.4%), Ask (3.9%), and AOL (3.1%). A coming together of Microsoft and Yahoo might bring their combined share up to 28%.

One of the key things Microsoft might be interested in is the search engine technology that Yahoo! has refined over it’s sixteen year lifespan and it get’s to be party to the search based innovations Yahoo! must have in mind – but doesn’t have the budget to execute. Not only the search engine technology but also the back-end advertising system which is a lucrative source of income for search engine providers.

Conversely, Microsoft brings with it a vast powerhouse of networking and technology skills, especially in the area of cloud computing and network scalability, not to mention its huge research and development budgets.

The new battle ground for search engine and advertising domination is undoubtedly the mobile market with users migrating, in their droves, to faster, more immediate and always-on mobile solutions, and the first businesses to master this new landscape will probably be the Google of tomorrow.

The brand identity for Yahoo! is also very strong in the consumer market place. Whereas Microsoft dominates the brand identity in the corporate world – it’s the consumer ground where mobility is moving to – and whilst Microsoft are working hard to bring Bing up to speed it would certainly benefit from a Yahoo! boost.

One thing to ponder is, if the deal does eventually see a true partnership between Microsoft and Yahoo! then the people at Ask might just be rubbing their hands together, in anticipation, as their 0.62% market share could push Microsoft into double-figures in the global search engine market (and based on comScore information in the US alone Ask could bring the combined search up to half that of Google).

All in all the deal looks rosy for us, the consumer, as we get a real alternative to search, better performance in our search results, and an increased focus in innovative search tools.

Further Reading

• Microsoft, Yahoo! search deal gets competition law go-ahead
• Steve Ballmer & Carol Bartz: Microsoft-Yahoo! Search Agreement
• Implementing Search Deal a Tough Task for MS, Yahoo