January 15, 2004

"Competition-wise, this sets Yahoo up to take Google on," said Search Engine Watch Editor Danny Sullivan. "The minute Yahoo bought Inktomi, the idea they were partners and friends fell by the wayside. But Yahoo has not given consumers a strong reason to think of Yahoo as different from Google. They need Inktomi out there to get their own voice and differentiate themselves."

The change will likely have only a small impact on Google's and Yahoo's businesses, at least in the short term, Sullivan said. Google earned just $7.1 million in fees from Yahoo in 2001 for providing its algorithmic search results, he said.

The real money in search comes from advertising revenues. Keyword searches made up 31 percent of the $1.66 billion in U.S. online ad sales for the second quarter of 2003, according to the Interactive Advertising Bureau (IAB), an industry trade group.

Since November 2001, Yahoo has run advertising search links on its site from Overture Services--which it acquired last year for $1.6 billion--meaning Google won't see any loss in its advertising reach when the deal unravels.

"This will mean virtually nothing to Google" from a business perspective, Sullivan said. "I don't know how much money they were making, but I'd be surprised if it was in the tens of millions. The real money in search is in ads, but Yahoo never carried Google's ads...What you really want to understand is the reach of their ad networks. That's not changing."

Sullivan said things will get even more interesting when Microsoft gets its Web search act together, something he said he expects by the end of the year.

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