Microsoft adCenter provides paid search results for Yahoo! Search and Bing, and their premium partners in the U.S. and Canada. Bing supplies the organic search results for Yahoo! Search.

The combined offering allows advertisers to reach a far greater audience with a single ad buy than they could before the alliance took place.

Since this arrangement has been successful – as successful as it could get in the presence of Google – in the U.S. and Canada, Microsoft and Yahoo! are now contemplating a similar formula in other regions. They intend to start this facility early next year in certain markets within Europe, such as the U.K., France and Ireland. They hope to be able to extend this service to all of Europe by the end of 2012.

Advertisers have been advised to continue to manage their Microsoft adCenter accounts with their existing support contacts as the holiday season approaches.

Once Microsoft and Yahoo! are ready to roll out their new facility in Europe next year, they will inform advertisers about the changes 3 months before the transition actually takes place.

While the combined market share of Yahoo! and Bing in the USA is more than 25%, the two search engines account for almost nothing in most of Europe. Most advertisers do not even consider advertising on either platform, and even when they do, impressions and click volumes are found to be dismal. The search alliance might get some interest, mostly out of curiosity and the hope for a serious Google replacement, but it is unlikely to make any significant impact.

Nevertheless, advertisers who do use the service have been advised to keep their contact preferences in ‘My Settings’ up to date, in order to receive regular updates and avoid inconvenience of any kind.

Microsoft Live Search had been losing market share in the last quarter of 2008 and first quarter of 2009, but Bing seems to be changing that situation now.

Reports from Efficient Frontier show that ROI received by advertisers has gone up by 43% for Google, and by 24% for Microsoft Bing, but has dropped by 8% for Yahoo!

This is in spite of the fact that the over all expenditure by advertisers on search marketing has gone down by 21% compared to the same time last year.

The amount that advertisers spent on Bing has gone up by only0.1 percentage points compared to last year, but has gone up by 0.7 percentage points when compared to the first quarter of 2009.

In the second quarter of 2009, Bing received 4.5% of ad spend of the clients of Efficient Frontier, while Yahoo! received 20.5% and Google received 75%. At the same time, Bing had 4.1% of the total clicks while Yahoo! had 24.3% and Google had 71.6%

Bing has been doing especially well in the travel and financial services sectors.

The report by Efficient Frontiers also shows that the amount which its medium spenders (between $50,000 to $2,00,000 per month) are spending on SEM has gone up by 5% in Q2 of 2009, compared to the amount spent at the same time last year, but small advertisers (below $50,000 per month) spent only 59% of what they spent last year, and large advertisers (above $2,00,000 per month) spent 78% of what they spent last year. Over all, the budgets have gone down by 21%.

On the other hand, another SEM company reported that large spenders (over $1 million per year) spent 18.77% more than they did last year, while small spenders (below $1 million per year) spent 25.33% less than they did last year.

comScore reports that Microsoft had 8.4% of market share soon after the launch of Bing in June 2009, compared to 8.02% in May 2009. but that figure is still less than the 9.2% which they had in June 2008. This may be the effect of the recession though.

Microsoft adCenter Analytics was designed with the intention of providing website owners with detailed reports of the activity of their users and also to let them track the performance of their advertisements.

While the service has been closed with immediate effect to new customers, it will continue to be available to existing users till the 31st of December 2009. On that date, all hosted services, data collection and technical support will cease. Those who wish to save any historical data have been advised to download reports through the export feature before that date.

The Microsoft adCenter Analytics team claims that the aim of undertaking this project was to fulfil the needs of small and medium size self-service customers, and to evolve a strategy for web analytics. They claim to have achieved this objective. Their blog states, “It enabled us to most confidently determine that we can be of most value to advertisers and publishers by offering a tailored solution that meets more specialized needs.”

The adCenter Analytics blog will now be called ‘Insights and Analysis’ and it will focus on research and best practices helping online marketers navigate better and improve market optimisation.

Strangely, Microsoft has suggested some alternative analytics services that their clients can now turn to, and the list includes Google and Yahoo!

In the last few days there have been some stories doing the rounds that this deal would be revived in a round about manner. It was suggested that Microsoft would lend money to some executives and investment bankers, who would then buy out Yahoo! at the price of about $13 per share, which is just a little over the current market price, and then sell it back to Microsoft. Sources at both the companies have rubbished these stories for now.

Acquisition rumours may have been fuelled by a comment by Steve Ballmer, in an interview with the Financial Times, where he said, “now is a good time for the software company to buy.”

However, in an interview with the Fox Business Network last week, Steve Ballmer told Brian Sullivan that the attempt to acquire Yahoo! was “a thing of the past”. He made it very clear that the deal would not be revived, while still keeping his options open about a partnership in any other form.

During the unveiling of the next Windows operating system, Windows 7, Steve Ballmer also admitted that the current financial crisis had affected the IT industry adversely, and it was realistic to expect that fewer people would be buying technology at the moment. While he sidestepped questions about the possibility of layoffs at Microsoft, he did acknowledge that it was important to conserve cash resources and be prudent about expenditure.

In the meantime, Yahoo! has just named Carol Bartz, who was the chairman of Autodesk, as its new CEO. This announcement has once again raised speculations that the Microsoft-Yahoo! deal may go through under her leadership.

Official Press Release

In a letter to the board of directors at Yahoo!, Microsoft CEO Steve Ballmer says, “Microsoft’s consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers. In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together. These discussions were based on a vision that the online businesses of Microsoft and Yahoo! should be aligned in some way to create a more effective competitor in the online marketplace. We discussed a number of alternatives ranging from commercial partnerships to a merger proposal, which you rejected. While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing.”

The first thing that springs to mind when reading this is that the rumours were true – in 2007 and even back in 2006 the two companies were considering ways to partner or join forces!

Another post on TechCrunch UK discusses the regulatory implications of such a merger. Microsoft is no stranger to regulatory scrutiny. The new merger will just add to the heap of inquiries already underway in the EU. The dynamics of this merger will be quite interesting, though…

Yahoo! Search Marketing is the most desirable asset that Microsoft will obtain as a result of this merger. The combined popularity of Microsoft Live Search and Yahoo! Search in the UK and Europe will still amount to less than 20% (even less than 10% in many countries) of the total search market. So by no means could this be considered anti-competitive.

Email and instant messaging, however, are a different story. The combined popularity of Yahoo! Messenger and MSN Messenger as well as Hotmail and Yahoo! Mail would dwarf all the competition. While the services are free, they do represent significant ad inventory, which could irk Google greatly.

Kelkoo and MSN Shopping are both extremely popular shopping portals that were once competitors, but will now join forces. This could create minor issues from a regulatory stand point, but the greater likelihood is the eventual absorption of the Kelkoo brand in the larger MSN portal.

Microsoft’s offer could not have been better timed. Yahoo! recently announced poor results and a bleak outlook, causing their stocks to fall (NSDQ: YHOO). The news has been received well by Wall Street, with shares of both Yahoo! and Microsoft (NSDQ: MSFT) rising in early hours trading and the overall market receiving a much-needed boost of enthusiasm.

If the two Internet giants do merge, it is not clear what will happen to the workforce. Yahoo! will most likely go ahead with the layoffs announced earlier this week. And as the two companies align departments, more downsizing is likely to occur in order to minimize overlap in job functions.

An interesting question stemming from this latest piece of news is ‘what will this merger mean for the search and search marketing industry’?

Update:

An official press release from Yahoo! states that the board have confirmed receipt of the offer from Microsoft and are considering the offer.