Search Engine Shakeout: Bing Grabs Market Share as Yahoo Waffles

A major shakeout is taking place among the Internet's search engines. The biggest surprise, perhaps, is that the recently launched Bing search site from Microsoft (MSFT) is at the center of it. Bing, which went live in May, is eating into Yahoo's (YHOO) struggling search business. At least that is what comScore, a Reston, Va.-based company that tracks Web traffic is reporting.

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According to comScore, Bing nabbed 10.3% of the total U.S. search market in November, up from 8% in May. During that time, Yahoo's search share fell to 17.5% in November from 20.1% in May. Google, (GOOG) of course, continued to show strong numbers, clocking in a 65.5% share in November up from 65% in May.

Bing's momentum appears to be building both in terms of traffic and public acceptance. (Not coincidentally, Bing released a well-received iPhone app on Dec. 15). That's in part due to clever implementations of visual search (that I am increasingly using) and other shortcut tricks that make it more likely a search query will return exactly the factual information one is requesting. And while Google may dominate the sector, even if Bing becomes a strong second player in the space, that could mean a huge revenue boost for Microsoft, which is hoping that the Windows 7 software package will finally give the company a long-overdue home run in the desktop operating system market. Two such wins combined could serve to rejuvenate Microsoft.

The growing success of Bing raises a number of interesting questions. First, Why is Yahoo losing share? The company will actually shut down its search algorithms sometime next year in favor of using the algorithms designed by Microsoft that power Bing. The most obvious reason for its declining share is that Bing is eating its lunch, a situation that Yahoo CEO Carol Bartz probably hoped would not occur when she signed the search engine licensing and advertising revenue sharing deal with Microsoft last summer. Bing has been making strong gains in the lucrative shopping vertical, a search space where Yahoo has long been the largest player.

Another key question: With Yahoo, Google and Bing commanding the search business, the outlook for Barry Diller's search engine, which is a distant fourth in the search market, is in decidedly unclear. Ask's percentage of the search market has been holding steady and Diller, who previously wanted to sell Ask, is now waffling, according to Greg Sterling at Search Engine Land, a popular blog that follows the search engine sector. Could Diller be wondering if Bing's entrance will shake up the market enough to allow Ask to grab a bit of market share from Yahoo?

For Yahoo, the risk of a total collapse in search is something the company has yet to contemplate but could possibly become a reality if Bing picks up considerable steam and Yahoo ends up trapped in a contract that hems in its ability to innovate in the search space. The fate of Yahoo's BOSS search offering, which allowed other companies to use Yahoo's search engines to craft their own customized search engine capabilities, remains unknown. BOSS was, according to many search experts, a smart long-term play that would position Yahoo well against Google.

All told, Yahoo clearly has a search problem and Carol Bartz has her work cut out for her.
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