January 08, 2004

Yahoo! vs. Google: Round One in the New Search Engine Wars


Yahoo! is ditching Google as its main search engine "perhaps as early as the first quarter", the WSJ reports. The paper's sources are an unnamed marketing outfit who says they have been briefed on the switch by Yahoo!

This will come as little surprise to anyone. The only question was when the contractual agreements between the two companies would end.

While Yahoo! is a shareholder in privately-held Google, it owns its own search engine technology, courtesy of the acquisitions of Inktomi and the consumer business of FAST. It also owns the world's biggest paid-for search listings business, Overture. All three were bought over the last year or so.

Google is becoming a serious rival to Yahoo!, as a portal in its own right, and as the purveyor of Adwords, Overture's most formidable competitor by far. :

But what’s the impact of the switch on the searching public - and more importantly for the companies, those wishing to be found? In an article I found on the Jupiter Web site Clickz:

    The impact: SEM [search engine marketing] just got much more expensive for anyone using Inktomi's (Yahoo's) CPC-based program. Companies using Search Submit could reap huge rewards without incremental costs... if Inktomi allows Search Submit customers entry into Yahoo! when the change is made. But don't bank on it.

    If you're a marketer whose not paying to submit your site to Inktomi and whose site isn't found in MSN or HotBot, over the next three months whatever traffic you enjoyed from Yahoo! (via Google) will disappear.

    For some, this is great news. It means new, increased traffic from Yahoo! for many who never ranked well in Google. For others, Yahoo! just got too expensive.

    Yahoo! and MSN combined drive roughly 45 percent of all search referral traffic, according to StatMarket. Google and those powered by Google drive another 45 percent.

    Inktomi will be as important as Google for many marketers, at least for a few months.

    We believe there's a strong likelihood MSN will launch its own search engine and drop Inktomi in the fourth quarter of this year. Rumors are circulating MSN may not offer a paid-inclusion program (though that may change), so organic MSN traffic may no longer cost per click come year's end.

There’s even been speculation Microsoft might buy Google, and with a likely IPO in the not-too-distant future, priced at estimates as high as a $15 billion market cap, Microsoft might be the only one who can afford it with the mountain of billions Gates & Co. are sitting on now.

- Arik

Posted by Arik Johnson at January 8, 2004 12:44 PM | TrackBack