The Online Search Industry: Predictions for 2007

Here are some interesting predictions floating around the Web on the potential for radical moves in the online search industry - and most of the ideas involve what Yahoo (YHOO) needs to do to stay competitive with Google (GOOG).

For instance, today’s 2007 prognostications from ZDNet’s Between the Lines blog proposed that Yahoo’s (YHOO) Panama advertising project will be a big success - enough to convince Microsoft (MSFT) that it needs to own Yahoo in order to compete with Google (GOOG) in online advertising. That’s an idea that crops up every once in a while; Microsoft at $293 billion is about nine times the size of Yahoo’s $34 billion in market capital, so the concept isn’t crazy; on the other hand, Microsoft has never acquired a company for much more than $1 billion, which would make buying Yahoo at say $40 billion a more a radical departure.

Topix.net founder Rich Skrenta has an interesting post on Google’s domination of the online search and advertising markets. One of his conclusions is that Yahoo could radically improve its revenue if it dumped its internal advertising efforts and hired Google to sell its ads. “Yahoo could add an extra $1.5B to their revenue overnight by conceding monetization to Google and becoming a distribution partner for Adwords, as Ask Jeeves did,” he writes. (Rob Sanderson, an analyst with American Technology Research, made the same suggestions several months ago.)

Meanwhile, yesterday John Battelle published a list of predictions for 2007; he thinks either Microsoft or Yahoo will buy AOL from Time Warner (TWX). If neither one bites, he says, AOL will go public, but the deal will not be well-received.

I’ll simply predict that in 2007, the search industry rumor mill will keep on cranking out plenty of material for me to blog about.