Microsoft and Yahoo partner up to leverage Bing engine against Google

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The next time you search for something using Yahoo, you’ll actually be using Microsoft’s Bing.

Microsoft and Yahoo finalized a 10-year contract yesterday that gives Microsoft control over Yahoo’s search engine, allowing Yahoo to spend less on running its engine technology and more on marketing its portal to generate ad revenue.

Microsoft now controls a little less than a third of the search engine market, strategically leveraging itself to take on its greatest threat: Google.

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Microsoft has poured millions of dollars into marketing its Bing search engine – television ads (between $80 and $100 million, according to Business Week), product placement (the girl in the Palm Pre commercial repeating “Bing” as she flips through Palm Pre applications), and distribution deals to make Bing the default browser on HP and Dell PC’s.

Bing marks the fourth time Microsoft has completely revamped its search engine since its birth in 1998.  It started with MSN search, which simply used search listings from other engines, such as AltaVista, Looksmart and HotBot.  After seeing Google’s rapid rise, it started building its own technology between 2004 and 2005.  At that time, according to ZDNet, Google controlled 36.5 percent of the market, Yahoo controlled 30.5 percent and Microsoft controlled a meager 15.5 percent.

It launched Windows Search Live in 2006, but only managed to control 10.5 percent of the market share, with Google increasing its share to 47.3 percent and Yahoo dropping to 28.5 percent.  It rebranded itself as simply “Live Search” in 2007, hoping to separate itself from Windows.  But its share dropped again to 9.4 percent as Google’s share grew to almost 60 percent and Yahoo’s share fell to 21.3 percent.  (Again, all these statistics are from ZDNet.)  Now, as Microsoft embarks on its new Bing technology, it has seen its search engine market share grow rapidly to 28 percent in Bing’s short lifespan – the new Yahoo deal will likely expand that even more.

It is too early to tell whether Microsoft’s new marketing campaign will strip Google of its users.  Google has an incredibly loyal customer base – people don’t search; they Google.  But Microsoft can outspend Google a gazillion times over in marketing.  When was the last time you saw a Google ad, compared to Bing’s “search engine overload” ads that play 50 times a commercial break?

What is certain: heated competition will foster new innovation and ideas, such as Google’s upcoming Chrome Operating System that is expected to take on Microsoft’s PC.

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