Maybe Don’t Count Yahoo! Out Just Yet

Josh Catone

Yahoo! has had quite a rough year. After rejecting Microsoft’s $45 billion takeover offer in March, the company’s stock has plummeted, losing almost 60% of its value. Recently, co-founder Jerry Yang, who took over as CEO of the company in June 2007, stepped down from the position after steering the company into some of its most troubled times.

Yahoo! faces two main problems when it comes to search: their declining market share, and their inability to make money off of their search inventory as efficiently as chief rival Google (which is why they had planned over the summer to outsource their search marketing to Google, and why Microsoft may still remain interested in a similar deal). If we leave aside the latter issue, Yahoo! might actually be on the road to fixing the former.

In 2004, Yahoo!’s share of the search market was 32%, compared to 35% for Google (source). 2 years later, Yahoo! had slipped slightly to about 29%, while Google had grown to 44%, mostly at the expense of Microsoft and AOL (source). Today, Yahoo!’s share of the search market has sunk even lower, to just 20.5%. Google’s, meanwhile, has soared to 63% (source).

But what those numbers don’t take into account, are the partner queries being done over Yahoo!’s new Build Your Own Search Service, which launched in July. When BOSS opened we wondered if a niche search engines built on top of Yahoo! could compete with Google in the long run.

Early results seem positive. In a blog post today, Yahoo! announced that five months in, BOSS has grown to greater than 10 million search queries per day. If taken in total, according to Yahoo!, BOSS-powered search engines would rank just behind as the 5th most used search engine on the web. What’s more important for Yahoo!, is the growth chart (pictured above), which looks fantastic. Yahoo! has seen steady growth since launch with search query volume apparently doubling every month or so.

And last month Yahoo! turned on BOSS-powered site search, which greatly lowers the barrier for entry for anyone wanting to utilize Yahoo!’s search back end.

In July, we mused that BOSS might end up serving Google well anyway, because Yahoo! had not yet revealed how it planned to allow partners to monetize search results. Yahoo! still hasn’t revealed program specifics, but has noted that monetization will come via Yahoo! controlled channels. That could help with the other search problem we mentioned.

Further, what might end up being the real killer app for Yahoo! here, is that BOSS essentially out-sources research and development for Yahoo! to anyone who wants to try their hand at tweaking current search algorithms. As we wrote in July, it is clear that Yahoo! has been unable to compete with Google with its own ranking and display algorithms for search, so opening its index and letting others have a go is a smart move. If anyone touches on anything so revolutionary that users start to choose it over Google, Yahoo! will be in the best position to acquire whatever it is because it will already use their index and back end technology.

Could Yahoo!’s BOSS strategy be a back door to get back into the search share race? Will they actually be able to mount a comeback against Google as a result? Or is it too little, too late? Share your thoughts in the comments.