In Search, Microsoft’s Gain Is Not Google’s Loss

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By Saul Hansell

The Microsoft-Yahoo deal announced Wednesday is likely to help Microsoft much more than it will hurt Google. And for Yahoo, it’s a mixed blessing.

The single biggest effect of the deal is that the now-separate auctions to place ads on the search engines of Microsoft and Yahoo will be combined. Since the two companies don’t have all the same customers, the total number of bidders will increase right away. And more bidders will be attracted to a marketplace that now has 30 percent of the search-ad inventory.

More bidders for the same supply should lead to higher prices. That means more money for Microsoft and also for Yahoo, which will get 88 percent of the revenue from searches on its sites.

But that doesn’t mean that Google will lose anything. It still has the largest marketplace, the best advertising technology and thus the highest revenue per search. Even if Microsoft earns more, the bids on Google won’t necessarily go down.

In Search, Microsoft’s Gain Is Not Google’s Loss - Bits Blog - NYTimes.com

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