An Internet Landmark Heads to the Recycle Bin

By Rob Pegoraro
Thursday, July 30, 2009

Adieu, Yahoo.

Not the Web site or the company, but the search engine. Yahoo announced Wednesday morning that it signed a 10-year agreement with Microsoft to combine search and advertising efforts, each ceding much of one field to the other.

"In simple terms, Microsoft will now power Yahoo! search while Yahoo! will become the exclusive worldwide relationship sales force for both companies' premium search advertisers," a press release declared.

Few Web users are likely to miss Microsoft's contribution to Web searching, but most people have fed a query to Sunnyvale, Calif.-based Yahoo at some point. Replacing Yahoo's search engine with Microsoft's Bing would delete one of the oldest landmarks in the Web landscape.

It would also take away a choice for users and a source of innovation for Web search, contrary to the claims at the "Choice. Value. Innovation." site that the companies set up to herald the news.

Yet their separate attempts have not slowed Google's steady growth. Yahoo may have no other choice but to make its search engine yet another casualty of outsourcing.

If so, it will mark the end of an long run.

Yahoo began life in February 1994 as a simple catalogue of Web sites put together by Stanford University students David Filo and Jerry Yang. It acquired its name -- short for "Yet Another Hierarchical Officious Oracle" -- not long after and then expanded into a true search engine.

That head start, combined with Yahoo's early proficiency and the missteps of other Web sites (anybody remember Lycos, Excite or HotBot?), allowed the firm to become the Microsoft of search engines for quite a few years.

And then yet another Stanford research project took off. Google found things on the Web faster and more accurately than Yahoo and didn't try to sell you 20 unrelated things as it did. Then Google began adding other Web services -- e-mail, maps, calendars -- that made Yahoo's fare look clumsy by comparison.

In the process, Google ran away with much of the Web advertising business -- a machine that generates most of its profits.

Inertia has helped Yahoo hold on to a respectable chunk of the market even as its search site grew stagnant and new ventures including a music store and a social network flopped. Almost 20 percent of U.S. Web searches ran through its site last month, according to ComScore's data. Yahoo has also kept a spot in many browser toolbars; for example, it remains the only search-shortcut alternative to Google on the iPhone.

Microsoft, for its part, spent years fumbling around with quasi-proprietary online services such as MSN or Windows Live. Two winters ago, it tried to solve its Internet issues by proposing to buy Yahoo for around $47.5 billion.

The Microsoft folks in Redmond, Wash., should thank their counterparts in Sunnyvale for spurning that offer, against the advice of nearly everybody in the technology business. Yahoo's rejection stopped Microsoft from burning through billions of dollars just in time for the economy to plunge off a cliff, then spending years cleaning up after an AOL/Time Warner-esque collision of corporate cultures.

Left on its own, Microsoft had to build a better search site, and with Bing it may have done just that. The site, unlike some of Microsoft's older forays and Yahoo's just-redesigned home page, delivers much of the accuracy and simplicity of Google.

Should the Yahoo-Microsoft deal survive antitrust scrutiny, Yahoo's search technology won't vanish down the bit bucket; Microsoft would be able to add its features to Bing. Likewise, Microsoft will continue to handle automatically placed search ads. And other Web services, such as e-mail and instant messaging, will remain separate -- your Yahoo Mail won't get forwarded to Hotmail or vice versa.

Filo and Yang surely didn't mean for their invention to land in Microsoft's parts bin. But if the alternative is the continued surrender of Web search and advertising to Google -- a competition in which Yahoo has done little to distinguish itself lately -- the company they founded hasn't left itself many other options.

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