NEW YORK (AdAge.com) -- In Silicon Valley years, search is getting up there.
Consider that Google celebrated its 11th birthday this year, and Goto, on which Google modeled its auction-based system (and which later became the underpinning of Yahoo's search-marketing offering), was born in 1998.
The maturing search market has also demonstrated its ability to withstand a recession, eking out growth during recent months and gaining share on other forms of advertising. It accounted for 47% of second-quarter internet ad spending, up from 44% a year ago, according to the Interactive Advertising Bureau and PricewaterhouseCoopers.
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In April, Microsoft Corp. announced Bing, its new search engine, with much fanfare and an $80 million ad push from WPP's JWT, New York.
Shortly after that, in July, Microsoft announced a deal with Yahoo in which Bing would power the portal's search for the next decade. Consumers could still perform searches at yahoo.com, but Microsoft would provide the results and the automated buying platform for advertisers. Yahoo would provide the worldwide relationship sales force for both companies' premium search advertisers.
The move, meant to challenge the industry giant by consolidating about 26% of search share to Google's 65%, is currently in regulatory review and is expected to be implemented next year.
But one thing is clear now: Microsoft CEO Steve Ballmer is serious about taking on Google. He said in June he'd be willing to spend 5% to 10% of Microsoft's operating income on search for up to five years -- implying spending of $1 billion to $2 billion a year based on the company's fiscal 2009 operating profits.
Meanwhile, Google is hustling to make sure it extends the lead it's captured in PC-based search to the mobile space, where the number of devices worldwide far outweighs the number of computers.
That was part of the reasoning behind the launch of Android, Google's mobile operating system. Just last month, Google launched a mobile-search service that will sit on the home screen of Android phones and search contents of the phones as well as the wider web. Considering there are more than a dozen Android phones debuting over the next year in the U.S., that's a bold move.
Reason for hope
Although Google has a wide lead in search, there's reason for other engines to be optimistic because comparatively few searchers confine themselves to a single engine. According to Nielsen data from July for the U.S., 27% of Google searchers also used Bing at least once that month, and 39% used Yahoo. Of course, the same holds true for Bing and Yahoo searchers -- a majority of them also use Google.
It's a trend that's obscured by the share numbers, said Ken Cassar, VP-industry insights for Nielsen Co.'s Online division. "The tendency is to assume, given Google's share, that they're locked in," he said. "Certainly its lead is formidable, and I don't see it changing significantly in the near future. But the reality is few consumers limit themselves to a single search engine, and the engine that builds a better mousetrap has the opportunity to make its case to searchers."
Time will tell how successful "Microhoo," or Bing, will be at picking off Google users. Advertisers, and even Google, should hope it can prove competitive as the market-share gap between Google and No. 2 Yahoo is upwards of 50 points. For advertisers, the alliance pushes the market's players toward a closer power balance; for Google, the newly strengthened number two may help keep regulators off the giant's back.
Regardless, it should be a year to watch. As Bryan Wiener, CEO of digital shop 360i, told Ad Age earlier this year, "The challenge is going to be how Bing and Yahoo are going to maintain their competitive position to Google during the year-and-a-half to implementation."
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