Search Sands Shift as Yahoo! Prepares to Drop Google

Yahoo!’s expected algorithmic search switch from Google to Inktomi will come in the next few months, according to search engine marketing execs who have spoken with Yahoo! employees. The change, while widely expected, will likely create huge disruptions in Web traffic patterns.

The news comes just as Google-watchers whet their appetites for the search player’s expected IPO. Yesterday, Bloomberg News, citing unnamed bankers, reported that Mountain View, Calif.-based Google has chosen Morgan Stanley and Goldman Sachs to head up a group of underwriters that would include Citigroup, Credit Suisse First Boston (CSFB), J.P. Morgan Chase, Thomas Weisel Partners and WR Hambrecht.

The infusion of cash the IPO is expected to bring makes it all the more important that Yahoo! divorce itself from its rival. It also needs to fully integrate its acquisition of Inktomi, which it purchased for about $235 million in December of 2002.

“Our short-term goal will be to have [the Yahoo! network throughout] the entire world using our algorithmic search in Inktomi,” said Terry Semel, CEO of Yahoo!, speaking yesterday at the Smith Barney Citigroup
Entertainment, Media and Telecommunications Conference in Phoenix. “We really feel that we’ve only just begun. We’ve been working very closely with both Inktomi and Overture outside of the U.S. We’ve been introducing both of those platforms to our search outside of the U.S.”

The move has been widely expected, with many in the industry speculating that Yahoo! has been holding off until its contract with Google expires. The terms of that contract haven’t been made public, but some say Yahoo! is preparing to flip the switch in March.

“It’s long been known that they were going to dump Google, and they’ve actually hurt their reputation by not having switched yet,” said Danny Sullivan, editor of SearchEngineWatch.com and a well-known search expert. “My best guess is they’ve held off so long for contractual reasons.” (SearchEngineWatch shares a parent company with this publication.)

By the time the change comes, Inktomi will be providing algorithmic search results across both Yahoo!’s network and MSN’s, since Inktomi results are expected to be fully integrated at MSN later this month.

“It will be a black day for many Web site owners who are ranked well in Google and enjoy free traffic from Yahoo! as a result,” said Fredrick Marckini, CEO of search engine marketing firm iProspect. “The instant the switch happens, they will lose as much as half of their traffic.”

The move may prove to be a boon for Inktomi’s paid inclusion business. Paid inclusion lets marketers pay to have their pages included in a search engine’s database, but doesn’t guarantee them a certain ranking in results. Inktomi offers paid inclusion, but Google doesn’t, because execs feel including paid listings would besmirch the search engine’s editorial integrity.

CEO Semel doesn’t have any such qualms, however, saying that the company intends to roll out both paid search, through Overture, and paid inclusion on all of its properties, worldwide.

“The biggest opportunity has to be in the fact that search will continue to grow. Other forms of search will continue to come about, whether that be something that looks like Yahoo! Shopping this past Thanksgiving and Christmastime, which takes advantage of algorithmic search, or whether that goes to other areas [such as to] more personalized search, to other local search, [and to] other areas that search has only just begun in,” said Semel. “So we see enormous possibilities on a worldwide basis in a very very high margin business that fully takes advantage of our huge audience.”

The constant and swift development of the search market will leave marketers scrambling to adjust as alliances form, are broken, and continue to shift.

“Optimizing an SEM spend is a little bit like trying to stand up in a rough ocean. When the big waves form, the sand literally shifts under your feet and you have to change your position to remain upright,” said Marckini. “In the eight year history of this space, the search engine landscape never stays static for more than eight or ten months at a time.”