Yahoo (YHOO) and Microsoft (MSFT) are very close — a year and a half after Microsoft went public with its buyout offer for the beleaguered web giant — to inking a search deal. AdAge’s Michael Learmonth reports that an agreement is likely to be announced this week, and would solidify Bing’s No. 2 position behind Google (GOOG). The deal, as it’s understood now, would allow Yahoo to dump its OK-but-not-great search engine in favor of Bing’s, saving on infrastructure and R&D costs. Searches on Yahoo.com would remain Yahoo branded (though perhaps with a “powered by Bing” notation).
So if this goes through, what's left of Yahoo? What's their key advantage except simply milking what's left of their past popularity? They become a portal site with email, and a nice finance site. But to me, they are slowly moving down the value chain if indeed they decide to use Bing instead of their own search. If this happens, to me it proves the failure of Yahoo's strategy over the last years. All the money they wasted on sideline portal ideas, they should have been plowing into search innovation. Clearly it matters, search isn't such just a commodity, if in the end they need to use Bing.
