Maybe Don’t Count Yahoo! Out Just Yet

By Josh Catone
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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.

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  • WebKarnage

    It looks promising, and it will be god for us all if Yahoo do well. One company getting huge market share tends to breed arrogance and complacency, just look how much bigger Microsoft were than Google 6 or 7 years ago, but their arrogance meant they missed all the big chances since.

    Electronic Arts and Google (to name but 2) now swamp Microsoft for growth and turnover, when they could have been bought out relatively easily by them back then.

    Google need to be pushed to keep things moving forward at the best pace for us all.

  • I’m a big Google fan, I like all of their products and use most of them over any other similar services, but I agree with WebKarnage – it will be good for all of us if Yahoo does well. It is common knowledge that competition is good for the users/consumers, and that it breeds innovation. Although Google has not shown any signs of turning into a Microsoft-like corporation (i.e. blissfully ignorant or just doesn’t care about innovation and user experience), it’s best to keep them on their feet.

  • Hierophant

    It isn’t really the search share race they should be worried about. It is how to monetize those search results and get their advertising share up. Will Yahoo! be around in 2010? Probably as the brand name has recognition but it probably won’t be the same company it is now. Someone will end up infusing the company through a stockholder buyout. What people should be looking at is what assets it will shed through sales or department elimination when that happens.

    If they can convince Icahn to stay with the company for the long haul they might be able to fend off the wolves like Microsoft and News Corp. long enough to regain their lost market equity. Hopefully they don’t try to enter into any stupid deals like the AOL purchase that was discussed earlier this year.

  • 24 Ways just published an article on how to use BOSS to create your own site search.

  • MauiMan2

    “I like all of Google’s products and use most of them over any other similar services”

    And almost everything they’ve ever done has been a copy of some other company’s already existing service. Sometimes they make incremental improvements to it and sometimes they don’t. And even when all they do is copy they still get credit for the original creation. Kinda strange.