Industry optimistic about Yahoo! and Microsoft deal

LONDON - Industry executives, including Sir Martin Sorrell, have applauded the Yahoo! and Microsoft ad tie-up, and are optimistic that the partnership will give marketers a leg-up against Google, while the renewed competition will drive innovation and investment from all three companies.

The 10-year deal announced yesterday will offer marketers a stronger alternative to Google -- which owns about 65% of the US search arena, while providing "scale" with the combined remit of the search market's numbers two and three in Yahoo! and Microsoft.

Sir Martin Sorrell, chief executive of WPP, gave his endorsement and said: "This is extremely encouraging and introduces more balance into the search and display markets.

"It is good for our clients and our agencies and for regulators."

The agreement sees Microsoft's Bing powering search across Yahoo!'s sites, while Yahoo! will sell search inventory for both companies. Both Yahoo! and Microsoft's display businesses will remain as they are and separate.

Yahoo!'s stock tumbled 10% upon the announcement, while Microsoft finished the day up 1%.

The combined force of Yahoo! and Microsoft could effectively boost returns on ads, which would allow the companies to snap up some of Google's market share, while lowering ad prices.

Rob Garner, search strategy director for agency iCrossing, told Reuters: "If the word gets out that Bing has plenty of volume and is performing at a high rate, whether through better return on investment or click rates, that's when advertisers will decide whether or not to shift more budget to Bing."

However, advertisers remain cautious as to whether Google can ever be nudged from its throne on top of the search market, or how long it will the deal will take to go through.

Bryan Wiener, CEO of 360i said that Google could play the same tactics Microsoft did when Google and Yahoo! were looking to tie-up last year.

Microsoft heavily lobbied the US Department of Justice last November to declare a Google/Yahoo! deal as anti-competitive.

The Yahoo! Microsoft deal is expected to see the same level of scrutiny.

Wiener told Ad Week: "The question became how long will it take? Google will do everything it can to delay this deal.

"There's a ton of distraction that goes on. You can't do any integration until it's done. It allows Google a long time to innovate."

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