Ba da Bing, RIP Yahoo – competitive lessons from the search wars

So today Microsoft clinches a 10 year deal which means its recently launched search engine Bing will be used by Yahoo.

In return for sacrificing its second place in the search market behind Google, Yahoo will be able to keep 88% of revenues (for five years) coming from search ads generated by its now Microsoft-powered search engine.

Microsoft's Bing will power Yahoo search. Competition for Google and curtains for Yahoo?

The search business that was one of the cornerstones of Yahoo from its early years is for all intents and purposes no more.

Some, like one of the shrewdest entrepreneurs currently in the search space Mahalo.com CEO, Jason Calacanis, would argue Yahoo has capitulated and is now dead meat.

In an email to members of his mailing list, copied to his blog, he says:

Aggression and innovation wins. Period … To say it clearly: Microsoft does not enter a market unless it’s important, huge and on the way to becoming even bigger. Microsoft is the buy sign, not the sell sign.

He argues the once innovative Yahoo lost its innovative edge, lost its talent and has now lost the plot.

It’s also repeating history, having once allowed an almost unknown (at the time) company called Google to power its search engine.

The logic of Calacanis is hard to contest. Innovation remains one of the most potent of competitive tools for any business large or small, but particularly small.

And small is what his own search/directory hybrid, Mahalo.com is, with a touch of innovation and a lot of iteration, ironically, of Yahoo’s original directory of the web.

When I interviewed Calacanis on SmallBizPod soon after its launch it seemed he might have his eye on a Google sale exit.

Now one search behemoth has fallen perhaps his praise for acquisitive Microsoft suggests the courting of a new suitor. Stranger things have happened.

For the rest of us, bizarrely, two main players in the search space may prove better than three.

Microsoft will undoubtedly drive even more competitive pricing into the search advertising market, if only to needle arch rivals Google.

Alex is the founder and editor of SmallBizPod, the UK's first podcast dedicated to small business, start-ups and entrepreneurship. Alex writes about topical small business issues, entrepreneurs and anything else that catches his eye here on the small business blog. http://www.smallbizpod.co.uk