Microsoft acquisition of Yahoo! – What does this mean for New Zealand?

The biggest story today is the proposed acquisition of Yahoo! by Microsoft for US $44 billion in attempt to provide a combined competitive front against the increasing dominance of Google. Let’s look at is how this would impact the New Zealand market in terms of online advertising.

This chart and shows the market share of the major search engines:

Source: Hitwise

Live.com is Microsoft’s search engine by the way.

As you see, a combined Microsoft Yahoo! paid search advertising offering would still only give you access to just over 6% of New Zealand’s search audience. It is a lot better than having to manage campaigns through three separate providers, as the overhead of setting up campaigns with Yahoo! and Microsoft can often make it not worth it when the volumes are very low.

In the world of CPM online media, Microsoft and Yahoo! both offer the standard banner ad placements across their content networks, although Microsoft also has the ability to serve ads on the MSN Messenger instant messenger application.

The irony of a Microsoft Yahoo! merger, is that Xtra just spent millions last year separating from Microsoft/MSN to go into their portal partnership with Yahoo! This included moving all their web mail customers to the Yahoo! platform, which led to thousands of New Zealanders to be without email access for an unacceptable amount of time. If this deal goes through, presumably this will mean more change and disruption.

Does Microsoft + Yahoo! = Google?

I think the answer is very clearly no in New Zealand. Just combining the two companies has limited impact for New Zealand online marketers. Overseas, it will be interesting to see what happens. Yahoo! is actually the number one content destination in the US in terms of total visitors, they just haven’t been able to monetise this position, with Google getting 75% of online advertising market share. In the UK, Google is also extremely dominant. Australia might be a different story, both the MSN and Yahoo! portal networks are massive there, but Google still dominates search categorically.

I think this deal is really the only option for Yahoo! but is it going to be the answer to Microsoft’s Google problem? Probably not, they still have a long way to go to catch up with the big G. I don’t think you can underestimate Microsoft though, the scale of that business is just so immense, given enough time and the vast capital and resources they have available they can possibly catch up. Look at XBox, everyone said Microsoft had no business entering the gaming console market and they started out a bit shaky lagging way behind PlayStation 2, but 7 years later, they have a clear dominant position over PlayStation 3 with the XBox 360.

What do you think? Do Google have anything to worry about?

Links

• What would a combined Microsoft-Yahoo Look Like?
• Steve Ballmer’s Internal E-mail to Microsoft employees about the Yahoo Acquisition