Microsoft and Yahoo have finally agreed to put their cultural differences aside for the benefit of a long term business strategy that hopefully may stop the tide turning against them as their global competitors Google move forward from search and social media, to operating systems and platform development.

There has been a lot of talk since last week's news. It seems that Google have friends in high places with yesterdays announcement that the US monopolies commission are looking into the deal. But on the assumption that the ten year deal does go ahead, how does this affect the search marketing industry?

According to figures released by Hitwise last month, Microsoft's search market share will rise to around 21.5%, that's roughly a quarter of Google's share. What this looks like on a country by country basis is very different. The most significant impact will be on the US search market. The deal will create a combined force, which will own 40% of the search market. However, the impact on market share in the UK will be far less significant at 8%, which will barely challenge Google's current share 89-90%.

MSN don't have a huge search market share out with the US, UK and France and will look to Yahoo to develop its distribution further. Perhaps this could be the 1st of a number of distribution deals that could develop MSN's market share. It is noticeable that MSN didn't look to acquire search providers that already using Googles' search capacity such as Ask and AOL as this would of both increased their distribution and reduced Googles' at the same time. Beyond all this, I'm sure all the major search providers are thinking about the global strategy of getting Baidu in China and Yandex in Russia involved as the global distribution battle commences.

If MSN's Bing is only going to supply Yahoo with organic results then it looks as if Yahoo is gracefully retiring out of the natural search market. Yahoo; in short will become an ad management platform ring fenced within its own network. For Bing, it means that many more users will be using their search services. There is still a long way to go, but it's a major step toward changing the balance of power in the search space. Bing cannot afford to expect market growth through advertising and distribution deals alone, at some point it needs to be adopted by the people through word of mouth recommendations and results that really matter. Google has always covered this ground by letting their API's be developed by public coders and users alike, this culture has yet to be adopted by MSN and needs to be, if it is to ever threaten Google dominance especially in areas like Western Europe.

For advertisers, decisions should be made on where your current market is. With little change in the UK market share, why should you consider your marketing tact? Well, the theory is that CPC rates should drop for a number of reasons. Many advertisers currently avoid the set up costs of trying out PPC on MSN and Yahoo because it's not worth the effort in comparison to the gains. With a wider distribution deal this now becomes a more attractive offer. This will also be a benefit to companies with bid management technology for PPC since they will have fewer APIs to integrate with. In short, with less resources needed in campaign management and set up, it will be more of an incentive to try the Bing / Yahoo offer. However, Google do still have the advantage of using the Adwords interface. It's been a blessing for SME's with its simple, easy to use interface that is so closely tied to free conversion and analytical tools. It will be interesting to see what happens next, will the lure of potentially reduced PPC spend counter balance the additional time and resources necessary to set up another campaign on another engine, perhaps it will be the state of the economy and the level of territorial competition that may be decide whether this will happen or not.

Regardless of the tiny market share of Microhoo in the UK, SME's will be able to try a PPC campaign without the enormous spend necessary to cover the entire Google UK network; there are at least choices that are more attractive to try out. In other territories where there is less of a market monopoly, Google will not be able to rest on their laurels; marketers will have noticable, cheaper alternatives. You should expect to see sizable shifts in spend between the top search engines as advertisers bid for those bargains on a keyword by keyword basis.

Beyond the control of paid search and marketing spend, decisions of using organic and paid search delivery techniques need to be taken into consideration. For many advertisers (especially those targeting the US), Bing with its expanded distribution is now a viable option to optimize your web page for. It's a simpler algorithm for now, less focused on external linking and page rank and more based around traditional values of the density, prominence and frequency of factors such as the domain name, page title, description, meta tags, heading tags, content, link text and the domain age. This algorithm will mature rapidly as the adoption rate of IE 8.0 accelerates and increasing amounts of user data are gathered, identifying the intent of the search query and the relevancy of the results through engagement time. This will help grow Bing market share, but as hinted earlier, it still needs to be loved by the people before it will make real in roads into taking noticeable market share away from Google, especially in countries like the UK where is so much ground to make up. And without that localised market share, how can you honestly evaluate how relevant your results are without the initial numbers to draw a conclusion in the first instance.

Which sectors will benefit?

Bing / Yahoo do seem to have the upper hand when it comes to advertising packages. If you look at Hotmail, Yahoo Mail, MSN, Yahoo, and an impressive range of portals that can distribute display and paid search to, they can roll out the potential for a highly targeted offering. Mature sectors like Travel, Finance and Automotive will see this as a potentially interesting vehicle for the future.

Yahoo!

A lot of people as asking What's the future for Yahoo! now that it is retiring from proprietary search? It seems as if it will need to reinvent itself quickly. Regardless of the uncertainly of what's going to happen to some its brilliant tools like Site Explorer and the Audio Search tool, Yahoo must accept that it is no longer a search engine, it is now a portal. There is an opportunity to take the brilliant bits of Yahoo's search capacity and find a way for Bing to use them. But personally I feel that Yahoo needs to find its own two feet and define what their USP is and then target them towards that niche in a similar way to what Apple did a few years ago. The most likely scenario is the future for Yahoo is in display advertising. By letting someone else focus on the search, it will let them concentrate on what has been successful for them in the past.

What is worrying is the fact that the deal will take a year before it is noticeable from a consumer / advertiser perspective. Yahoo have consistently dropped market share since the deal was first seriously discussed 2 years ago. For some markets the feeling is it is all a little bit too late to make any noticeable change and the real challenge will be over the next 20 year period while the bigger battle of operating systems takes place. But whatever happens, it seems as if you'll probably see no changes over the next 12 months.

SEO

For brands and site owners using SEO to target the US, they should continue building qualified links from the USA as if they are going out of fashion, Google loves them, this is the primary factor when it comes to gaining positions on Google.com. Reoptimise your pages using those tried and tested "on page" techniques, Bing seems to love them. Hopefully you'll see the best of both worlds.

Those targeting the UK should continue building qualified links from the UK as always. Only those with most bases covered in Google or no visibility whatsoever should spend resource time tackling that 10% that Bing and Yahoo will offer you.

Paid Search

For paid search users there are real opportunities to improve your returns, especially targeting markets beyond the UK. Smaller management fees and a honeymoon period while there will be paid search bargains to be had are to be exploited. This will become a highly competitive period for paid search and bid management agencies.
Big brands with large budgets will have an opportunity to make up some real ground as the merger becomes a reality. Those brands with poor organic visibility (especially in the US) can make the most of this opportunity.

Display Advertisers

Big brands that are using CRM strategies such as segmented email marketing, display advertising and vertical targeting should see thing blossom in the next 2 years. Google owns Doubleclick and MSN owns Bing and Yahoo and both have interesting offers that are looking at the bigger picture of engagement, conversion and retention. Who loses out of this is still anyone's guess, but I'd put my money on SME's losing out on the display visibility wars, simply because they wont have the capital clout that big brands have to make the most of the amalgamated capacity of the offerings that MSN and Google will have to offer to their clients. In short SME's will be stuck with search and social media as their key routes to their online markets.

So there it is, the Microsoft Yahoo deal and a whole load more to think about over the next year to come if it all comes together. I dare say we've not heard the last of it.