Yahoo! Search Finally Intergrates With Bing, Challenges Overseas May Be Too Great

Yahoo! (NASDAQ: YHOO) says it has finally integrated its search function with Microsoft’s (NASDAQ: MSFT) Bing, part of the  deal that the two companies set over a year ago. The two search engines will essentially become one. That will make it more likely that the combined entity can challenge Google (NASDAQ: GOOG) and save Yahoo! R&D money.

Shashi Seth Senior Vice President of Yahoo! Search Products wrote that “I am proud to announce that the transition of organic search between Yahoo! and Microsoft is complete.” In turn, Microsoft’s Satya Nadella – Senior Vice President, Online Services Division said “Bing is powering Yahoo!’s search results in the US and Canada (English only for now, the other languages will come in the weeks and months ahead).”

The combination of the search ad platforms of the two companies should be done by year’s end.

Wall St. does not seem to think much of the deal, which seemed promising when it was first announced. Yahoo!’s revenue has stalled. The firm has been able to cut some costs because of the arrangement, but those benefits are now priced into the company’s stock which has fallen about 15% this year. There has been speculation that CEO Carol Bartz may be in trouble, but that is highly unlikely. Yahoo!’s board members have to ask whether any other leader could have done better given the nature of the firm’s business. The answer is probably not.

Since the partnership was signed, Google has gotten more powerful, not just in the US but also overseas. Google’s search share in America is between 65% and 70%. It holds similar market share in most countries in Europe. Google is a distant second in market share in China to Baidu (NASDAQ: BIDU), but it did not leave the market as some assumed it would after a dust up with the Chinese government earlier this year. Google may not have the market share it would like to, but Microsoft and Yahoo! have nearly none in the world’s largest internet market. Google has also set a deal with the owner of Yahoo! Japan which will extend its reach in that Asian nation.

And, two other huge markets–India and Russia–have search markets that are dominated by local products. In Russia that company is Yandex, and in India it is Rediff.

Bing is not only in a difficult position in the US. It is also flanked in most large countries around the world.

Douglas A. McIntyre