Yahoo-Microsoft deal will take time to make impact

The 10-year Yahoo-Microsoft web search deal forged last month to better compete against market leader Google might not immediately impact the Middle East, and will not show any signs in the next 10 months, say industry officials.

Yet, the agreement gives way to many opportunities, especially since Yahoo was not very aggressive in offering Arabic content earlier as opposed to Google.

Both Yahoo and Microsoft officials in the region outlined many upcoming projects to develop their consolidated presence, in an attempt to catch up with the almost 40 per cent gap in market share compared to Google.

Globally, the combined market share of Yahoo-Microsoft adds up to 20 per cent compared to 65 per cent for Google. In the region, the YouGov BrandIndex has recently ranked Google as the top IT brand in both Saudi Arabia and the UAE.

Although officials insist it is still too early to discuss the implementation of the agreement, Microsoft and Yahoo officials are being questioned as to how this deal would really help them face Google's dominance in the market.

Irfan Ahmad, Director, Yahoo Ad Sales Representative in the Middle East, said Google's dominance is mainly in the search keyword advertising business, while Yahoo leads in display advertising through banners. "This is true for the US and is equally valid in the Middle East. Unfortunately, in the Middle East, Yahoo does not offer country specific keyword targeting so we really do not compete in search here.

"Going forward – and this is not clear at this stage – if with the Microsoft Bing and Yahoo Search combination, we are able to do country targeting with search keywords, we will start competing with Google."

He added: "The Middle East is a significant growth area despite the worldwide slowdown. While MSN has MSN Arabia and Google has some Arabic offerings, Yahoo has been slow in directly entering the market - although we have been around selling online advertising on Yahoo since 1999 – much before MSNArabia and Google. However, things are changing and Yahoo will very soon be entering the Middle East with a localised portal."

On the other hand, Charbel Fakhoury, General Manager, Microsoft Gulf, said the deal was designed to provide real choices, better values, and more innovation to consumers and the internet by creating an attractive, sustainable and credible alternative to Google.

He said: "For consumers, the increased volume of queries will enable us to improve search relevancy faster than as separate entities. Consumers get better service, and for the industry, all search players must continue to increase innovation to keep pace. The same is true for advertising relevance, which will deliver advertisers not only a larger audience to target more efficiently, but also will increase their return on investment as the service and ad platform improves. More competition will yield more innovation, more efficiency and over the long-term, more success for the new, broader platform."

Concerning the region, Fakhoury said: "The Middle East definitely offers a growth opportunity, however, it is a bit too early to be talking about implementation details. Over the long term, we aim to have strong offerings across all geographical regions, and will partner with customers, publishers and advertisers to ensure we are competing effectively in all markets."

Microsoft's Bing search engine – launched in May to replace Live Search and MSN Search – is also required to make an effort. According to web analytics firm comScore, market share for Bing inched up half a per cent in July over its June performance. However, according to the latest figures, that is still flat from the performance of Microsoft's pre-Bing search services of a year ago in July 2008.

Microsoft executives have repeatedly said that they do not expect to take the search market by storm, but rather by increments as users gain familiarity with Bing and as the search engine itself improves to better compete with Google.

Meanwhile, a Microsoft research affirmed that people were not usually loyal to one search engine. This could run in favour of Bing especially in a market that Google currently dominates.

Fakhoury said: "Our data on search loyalty seems to apply globally. The simple truth is the best product experience will win over clients in the long term."

"Bing is already generating significant buzz, positive reviews and momentum in the marketplace. The partnership with Yahoo will serve as a powerful accelerator to our efforts to continue to innovate in the area of online search," he added.

Ahmad agreed that any shift in search engine preferences among internet users will happen only gradually. "People do like to experiment and if they like what they get, they will move to a new search platform."

Currently, about 30 per cent of Yahoo's 29 million users in the Mena region visit Yahoo Search. "This number has been fairly consistent over the years and any improvement of this performance through the Microsoft partnership can only help in growing the numbers," said Ahmad.

However, recent reviews said the small growth seen by Bing is at the expense of Yahoo. But both Fakhoury and Ahmad remained positive, building expectations of growth based on the contribution of each party to the agreement.

In fact, Ahmad dismissed this as a major issue, saying that with huge investments made by Microsoft to promote Bing, it is expected that there will be a decrease in market share of all other search engines.

For the region, online advertising has just started to witness a rise, drawn by increased interest from advertisers and agencies.

And the Microsoft-Yahoo deal is expected to build on that. "We have been actively pursuing advertising agencies and have been educating advertisers about the benefits of online advertising," said Ahmad.

"The current recession has shifted a lot of attention to online media and this is good for us, but there is a lot of education left and we continue to work with agencies and clients, holding hands to get them familiar with this medium."

Ahmad said social media has helped in the education process. Although it is competition in a way, the efficiency in monetising social media does not match that of search engines.

"Facebook is a case in point. Many marketers and ad agencies are on Facebook and even though they may never have done any online activity, they have started advertising. However, the click-through-rates on Facebook and other social media are very low and the clients then start exploring other online media options such as Yahoo. The bottom line is that social media is competition but it is healthy and helps to grow the size of the pie," he said.

Fakhoury said he was not worried about competition from social media. "The ability of social media sites to monetise efficiently has not been fully proven. We think we have a great offering for advertisers through this partnership and we are excited to see it come to fruition," he said.

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