Will Ask.com/Google Merger Inspire Yahoo!/Microsoft?

IAC’s (IACI) Ask.com already uses Google’s (GOOG) text ads, but hitherto, it’s still used its own search algorithm, which it acquired when it bought Teoma. Teoma and Wisenut were once considered to be potential Google killers, Ask Jeeves bought Teoma; Looksmart bought WiseNut.

Anyway, Ask.com already uses Google’s text ads and when Google filed to go public, it was disclosed that Google was giving Ask a 110% revenue share. That’s right, Google was essentially paying off Ask.com for market share.

However, IAC always maintained that one day, it might launch its own ad platform, too. This always seemed to be a hollow threat, because Google has created the world’s most effective and valuable advertising marketplace… it did not make sense for Ask.com to do that, frankly.

Friday SAI reported that blanketed between potential layoffs is the possibility that IAC simply drops using Teoma to power Ask.com’s search engine and instead fully turns to Google for both algorithm and paid search.

The implications are actually both trivial and important. They are trivial in that Google is getting access to Ask.com’s less-than-5% market share as is via the paid ads relationship; but in the backdrop of Microsoft (MSFT) arguing that the market needs a strong No. 2 to fend off a Google monopoly in search, Google might also want to avoid this. Google already powers AOL (TWX).

So if Ask.com is also powered by Google, in fact, Google “owns” the real estate on 3 of the Top 5 search engines (Google, AOL and Ask.com). In that context, I hate to say it, but it would make sense for Yahoo! (YHOO) and MSFT to hook up, because otherwise YHOO and MSFT will be fightning for the #2 slot instead of taking on Google for the #1 rank.

Comments

[Shia]

It might make sense for Microsoft and Google, but is this good for advertisers.

There will be one less player which means less choice. Will the merger drive up the costs of PPC? Already competition for popular keywords is going up as more and more businesses move their budgets online?

[Tom B]

MSFT/YHOO is bad for consumers, users, shareholders--period. Tying two unrelated, struggling companies together is NOT a recipe for success.

[Sherry Gil]

The proposed acquisition of Yahoo by Microsoft will be good for Microsoft, and for Yahoo shareholders, but will be bad for the rest of us - Google included.

While it is true that Google dominates the search market, Microsoft, on the other hand, dominates the PC operating system. After Microsoft annihilated Netscape Navigator, it claimed that its Internet Explorer (IE) is a natural extension of its windows operating system. If Microsoft acquired Yahoo, what would prevent it from renaming the new MSN-Yahoo search engine the new IE search, and from claiming that it is a natural extension of its IE brower? Would future issues of IE come with a default IE search engine? What would happen to those who would prefer to use Google? Ah, yes, they could always go to Google.Com

The way to compete with Google is to hit it where it hurts most - its pocketbook. Already there is some suspicion that Microsoft might be screening its search engine result where websites with Google Adsense and Google search box might be showing farther down in MSN search results. For more on this, please read: seekingalpha.com/artic...

A new MSN-Yahoo search engine will be bad not only for Google but for the rest of us. It should raise anti-trust concern.