Good-bye Yahoo! Search

News organizations around the world are reporting that both the European Union and the U.S. Department of Justice have approved the Microsoft-Yahoo! search-advertising deal.

That will most likely prove to be the undoing of the Yahoo! search brand. History teaches us that when search brands lose their uniqueness people abandon them quickly.

Yahoo!’s worst business decision ever was to install Carol Bartz as CEO. Since she took the helm of the troubled search company, she has closed down or sold off many of Yahoo!’s non-search assets. The clear signal here is that Yahoo! leadership has no intention of being involved in search except as a secondary player like AOL or other “content providers” that add someone else’s search index and algorithms as an after-thought.

Sure, AOL adjusts the Google search results and actually does a better job of filtering mature content from those results than Google, but the fact of the matter is that AOL just doesn’t appeal to the general market as a search engine. According to some media reports, most of AOL’s search users come from its dying ISP business customer base.

Previous attempts by former search brands to become “content portals” have failed miserably. Previous companies that sacrificed their search brands for other priorities lost search users quickly.

Search engine market share is still wrongly measured by the obsolete metric of PageViews (number of queries performed). This metric has absolutely nothing to do with how much search traffic the search engines are sending to other Websites. The inflated PageView counts that are attributed to Google are not reflected in all measures of search referral traffic. Some sites actually report more referral traffic from Google than the PageView-based metrics suggest, and some sites report less referral traffic from Google.

But the false justification that Microsoft offered for this deal in the first place — that competition will somehow be increased by eliminating a competitor from the field — is the most disturbing part of this arrangement. Anyone who has participated in a pay-per-click advertising network knows intuitively that when you drive more advertisers into fewer networks the bidding wars drive the price of traffic acquisition up.

The European Union and the U.S. Department of Justice are saying that increasing the cost of acquisition for small businesses will be good for them. Someone needs to explain that to me. I really just don’t get it.

You see, the only way an advertiser benefits from advertising is if the advertising drives sales. Putting brand-related advertising aside, anyone who is trying to generate sales through PPC search needs to sell enough inventory or services to make a profit. When you increase the cost of traffic acquisition for a business of any size that business MUST pass on the cost to its customers.

Hence, ultimately it is the consumer who will pay for the increased competition between advertisers.

As advertisers will now have 1 less choice in search advertising to work into their strategies, they will go with the lesser of two expenses. If they were dealing with manufacturers economic theory suggests that the manufacturer with the higher costs would be compelled to find new ways to lower its own costs and thus become more competitive. The only way an auction system becomes competitive, however, is to drive down the price of the bidding. Google and Microhoo can do that in only one way: lose advertisers.

The advertising market will equalize itself in the way possible: it will disburse the money that is planned for advertising across fewer high-cost resources and look for new, low-cost resources. Those new, low-cost resources are more likely going to come from social media than from search, whose advertising paradigms have been mired in stone for years. Don’t look for Microsoft to innovate in the search advertising technology — Microsoft has almost never innovated anything in its existence.

Consumers lose out in another way: they are losing a search algorithm that provides them with a unique point of view. One of the reasons why Google gets so many queries is that people increasingly have trouble finding the content they are looking for on Google. That is not the only reason for the growth in Google’s PageView counts, but it is an important one. When searchers cannot find what they are looking for they dig deeper into query results or, more often, they either change their query or change their search engine. All three (now two) major search engines share most of their searchers between each other.

As people realize they are seeing Bing results on Yahoo!, they’ll naturally gravitate toward Bing search. That is what happened with most of the users who once frequented Altavista, a search engine that Yahoo! now owns. There is virtually no brand value left in Altavista, except as a memory of what once was.

Last July when Microsoft and Yahoo! announced this insane deal I filed a Clayton Act Complaint with the U.S. DOJ. Not being a European citizen I found no recourse for complaining to the E.U. regulators. When the DOJ people interviewed me they asked some pretty blunt questions. Nonetheless, I sensed the skepticism in their voices at times. At one point in the conversation they asked, “What if your peers in your industry disagree with you?”

“They may indeed,” I conceded. I wasn’t pretending to speak for anyone but myself. At the end of the conversation they asked me to provide them with names of other people in the industry whom I thought would be good to talk with. I finally gave the DOJ contact information for four people. I don’t know how many SEOs they finally talked with. I don’t know how many SEOs agreed with the proposed arrangement.

I only found out afterward (like everyone else) how Todd Friesen felt about the deal. His position is very close to my own. His exasperation seemed very much like my own, as well.

The DOJ people are very smart, very professional — and yet, they just don’t get it. The odds of Yahoo! coming out of this deal with anything other than a revenue disaster on its hands are extremely low. Soon Carol Bartz will have nothing left to sell. She won’t be able to disguise Yahoo!’s dwindling revenue base with income from asset sales. The yard sale is about over, in my opinion, and the house may be looking might clean to some people but it looks very empty to me.

With fewer assets to leverage visitors into using Yahoo! search, Yahoo! has weakened itself in the search marketplace. You can see some indication of this in the dwindling PageView counts that third-party metrics services estimate for Yahoo!. Now, it’s possible those guys are wrong. Unlike me, the DOJ and EU had the authority to ask Yahoo! and Microsoft to report their real visitor traffic and search referral activity. Maybe they did ask for that data. Maybe they were satisfied that the trends reported by third-party agencies were inaccurate.

All I know is that I increasingly see signs that Bing is going to surpass Yahoo! in PageViews. At the end of the day, Yahoo! won’t generate as much revenue from search advertising as it would have had it taken measures to hold on to those PageViews.

Of course, any SEO who tries to measure success for a client on the basis of PageViews is running behind the times. The bar we’re expected to match is conversions — at least if you talk with most of the leading voices in our field, that seems to be the consensus. And it’s a consensus I agree with.

A few people like Danny Sullivan continue to support the obsolete metric of using PageViews to measure market share for reasons that, frankly, I find incomprehensible. But the diversity of opinion in our industry may be one of the reasons why the DOJ investigators concluded that the Microsoft-Yahoo! deal won’t hurt consumers.

I am sure they received many complaints concerning the proposed deal. In fact, I read about some of those complaints in the news media — who promptly forgot about those stories and have been writing as if everyone wanted the deal to go through.

To my knowledge, the closest anyone in the search-related industries came to supporting the deal was a joint letter by four major advertising agencies, including WPP (which is an investor in Visible Technologies). The joint letter argued that this deal would be good for business and consumers.

Sir Martin Sorrell, I respectfully suggest your letter neglected to mention that those WPP properties that manage PPC accounts for clients can expect to see increased revenues from the higher cost of acquisition. Visible Technologies, I am happy to say, exited the PPC campaign management business some time ago. But in case anyone has any doubts, I am only expressing my own opinion and I do not speak for Visible Technologies or any of its investors on this matter. So far as I am aware, Visible Technologies as a company has not formed or express an opinion on the Microsoft-Yahoo! deal.

In the words of my boss, whenever there is any change in the search market, I should just “deal with it”. And I will deal with it. As Yahoo! continues to become less important to searchers it will become less important to my clients. Que sera sera.

What irks me is that it didn’t have to be. But one could philosophically argue that the failure of Yahoo! as a search brand became inevitable the day Carl Icahn decided to destroy Jerry Yang’s power and influence at the company. Icahn’s greed ultimately cost him and his investors millions of dollars because he doesn’t understand that Yahoo! built its brand on search. Bartz’s ill-founded selloffs of non-search assets are rooted in her lack of understanding about how search brands need visibility just like other brands.

Many bad choices and decisions have gone into the debacle that will ultimately render Yahoo! a small Internet content provider competing with many larger content providers. Yahoo! has been publishing content for years but that hasn’t been the brand value that Yahoo! presented to consumers. Even though consumers read Yahoo! news stories and shop in Yahoo! stores and discuss their favorite topics in Yahoo! groups, everyone but Yahoo! has been going along thinking that Yahoo! was in the search business.

I’m done with Yahoo!. I’ll monitor their search results as long as clients want me to but as a user of search I’m not going to invest any more effort in using their services.

I’ll just get my search referrals from Bing. That’s what I do with AOL/Google. I have no personal need or desire to optimize for AOL as Google sends me many, many times more traffic than AOL.

If a client asks me to optimize for Yahoo!, I’ll do it. But I have the freedom to say to them, “Why? What’s the point?” Believe me, I’ll be saying that a lot in the years to come. Now you might as well optimize for Altavista. It will become about as effective.

Good-bye, Yahoo! Search. You were good while you believed in yourself.