Yesterday’s deal between Microsoft (NASDAQ:MSFT) and Yahoo (NASDAQ:YHOO) is a big boost for Bing. Microsoft’s new engine will power search on Yahoo, raising its visibility and, perhaps, eating into Google’s market leadership.
If the stock market is any guide, Microsoft is getting the better of the deal. As Techcrunch notes, Yahoo’s stock fell 12% on the day, lopping almost $3 billion off its market cap.
Microsoft , on the other hand, was up about 1.4% – boosting its market cap by about $3 billion.
The real question, of course, is how the deal will affect Google. Google (NASDAQ:GOOG) was down about 0.8% (around $1 billion in market cap), a bit more than the decline in the Dow or the Nasdaq. That suggests that Google investors respect the MSFT-YHOO deal, but aren’t running scared just yet.
The logic of the deal seems impeccable. Yahoo is an also-ran in the search space, while Microsoft’s Bing is an exciting new entrant. Just how far Yahoo has trailed in search was driven home for me when I reviewed my posts about the search market (here is a list). Google gets the most attention in those posts, of course, but I also discussed competitors Bing, Wolfram Alpha, and Cuil. But it never occurred to me to mention Yahoo. That oversight is vindicated by today’s deal.
Personally, I am looking forward to having Bing on the Yahoo home page. I’ve spent far too much effort avoiding Yahoo’s search engine (e.g., by uninstalling the annoying Yahoo toolbar that various services foist on you when you get new software). Perhaps now I will have reason to let Yahoo take up a bit more valuable screen space.
Disclosure: I don’t own stock in any of these companies.