Analysis: The impact of Microsoft's bid for Yahoo on customers

If the massive deal does go through, Google will at last face a major threat to fend off. Technical integration between Microsoft and Yahoo could be a nightmare, according to some analysts. Yet customers might stand to gain.

Although Microsoft will edge up in market share closer to number one player Google, the deal will call for immense amounts of technical integration, analysts and users tend to agree. On the other hand, the potential effects of the mammoth buyout on customers and smaller ad and search competitors are still less clear.

The "pay-per-click" ad market that Google now dominates is worth $16 billion a year already, and it's still growing fast, according to Tim Booth, an analyst specializing in search technologies at the Kelsey Group.

Currently, Google owns about 75 percent of the ad revenue pie, Booth told BetaNews. By buying up Yahoo, Microsoft will jump a big notch.

Might Microsoft ever wind up ahead of Google? "I guess anything can happen," the analyst quipped. But Booth doesn't seem to be banking on that possibility.

"Google would still be ahead, but Microsoft wouldn't be as far behind. That's the business reason," concurred Rob Helm, an analyst at Directions on Microsoft.

"But the technical integration would be a huge challenge. It'd be sort of like taking English and 'Klingonese' and trying to combine them into one language," Helm told BetaNews.

Microsoft hasn't always integrated manifold acquisitions all that smoothly, Helm contended, citing the Microsoft Dynamics CRM line-up as one example.

In the ad and search categories, Microsoft has recently made a number of other acquisitions, including TellMe, a specialist in voice-enabled mobile search, and aQuantive, a huge advertising network.

But at least one customer is not at all daunted by the need for integration between Microsoft's and Yahoo's fare. Liz Serafin, senior director, search engine marketing, for TMP Directional Marketing LLC, said she welcomes Microsoft's acquisition of Yahoo -- if it happens -- because she likes Yahoo's search technologies better than Google's.

Serafin noted that Yahoo and Microsoft partnered on search technology a few years back, Microsoft integrated Yahoo's search engine into MSN's.

"MSN's search engine works better when I'm doing ad campaigns than Google's. I can search more granularly -- by age range and income level, for example," the veteran user told BetaNews.

She also pointed out that Yahoo recently made a small acquisition of its own: Right Media.

"I'm very interested in finding out more about Right Media's image searching technology," Serafin said.

But what about other small players in the ad and search engine areas, which specialize in capabilities such as searching the blogosphere or vertical market sites? What will happen to them if Yahoo accepts Microsoft's offer?

"Whenever there's an acquisition of this size, there's consolidation," Helm admitted.

"But for some of the smaller companies out there -- covering niches that Google and Microsoft don't play in -- the game won't be over at all."

Booth suggested that some more small rivals might be acquired in the future by Google or Microsoft/Yahoo -- or even by other companies in the search market's current "top five."

"Yahoo's results for the last quarter were bad, but Google's were actually good. Google's just didn't meet initial expectations. But the search market has been growing so fast for so long that expectations could be getting a bit inflated," said Booth.

"And there's plenty of money out there [among most of the large players] for more acquisitions right now. Lots of money," he told BetaNews.

Actually, Booth said, Yahoo got started in "pay per click" even before Microsoft -- by buying and integrating technology from Overture, a company originally known as Go To.

"Google then copied Yahoo," according to the Kelsey Group analyst.