Resistance Is Futile: Is the Merger Innovation or Assimilation? (Part 2/3)

Michelle Stone - March 27, 2008

With Microsoft’s unsolicited bid to purchase Yahoo, how would such a merger affect the Internet, especially where search technology is concerned?

Previously, we explored how the proposed Microsoft — Yahoo merger would affect our use of the Internet. In this installment, we’ll take an historical look at the ways in which Microsoft, Yahoo, and Google have enhanced our experience on the Internet.

Before we soothsay and gaze forward to what may be with “YaSoft” or “MicroHoo” and how Google will react to either possible incarnation, let’s take a look back to where the big three search engines began.

MSN Search/Windows Live Search/Live Search
MSN Search was introduced in the fall of 1998 using search results provided from Inktomi, a search company whose technology employed the widely-used HotBot search engine. In the spring of the following year, MSN Search launched an improved version of their search engine, one which displayed listings from LookSmart, an online advertising company, blended with results from Inktomi.

Subsequent upgrades to MSN Search provided it with its own Microsoft-built search engine results, offering an index of data that was updated on a weekly or even a daily basis. MSN Search also began providing its search results to other search engine portals in an effort to better compete in the market.

In 2006, MSN Search underwent the change to Windows Live Search and then to Live Search. The changes moved beyond the offering of a search engine, index, and web crawler and expanded its use to include the ability to search for specific types of information using search tabs for the Internet, news, images, music, computer desktop, local search, and Microsoft Encarta, the digital multimedia encyclopedia published by Microsoft.

Live Search offers innovative features, among them the ability to view additional search results on the same web page (instead of needing to click through to subsequent search result pages) and the ability to dynamically adjust the amount of information displayed for each search result. It also allows users to save searches and see them updated automatically on

Before Yahoo was Yahoo, it was “Jerry’s Guide to the World Wide Web”. Yahoo was originally developed over 13 years ago as a web-based directory of sites compiled by Jerry Yang and David Filo, then students at Stanford University. The original organization of Yahoo was a hierarchical structure as opposed to a searchable index of pages. Over time, “Jerry’s Guide to the World Wide Web” developed into “Yet Another Hierarchical Officious Oracle” (Yahoo), a full-fledged portal with a search interface.

In the early 1990s, “Yahoo Search” initially referred to the Yahoo-provided search interface. Much like the early stages of MSN Search, the results presented weren’t from Yahoo per se. The actual web crawling and storage and retrieval of data were powered by Inktomi in 2001 and later, in 2004, were powered by Google.

Wanting to provide its own search engine results, Yahoo bought Inktomi in 2002. In 2003, it purchased Overture Services, Inc., which owned the AllTheWeb and AltaVista search engines. It was also in 2003 that Yahoo! Search finally evolved into its own web crawler-based search engine called “Yahoo! Slurp”. Yahoo had taken the step of combining the capabilities of the search engine companies it had purchased and put those capabilities into a single search engine. In this way, not only could Yahoo serve up its own results, but it could also sell those results to other companies. It was at this time that Yahoo’s relationship with Google was concluded (as they were now direct competitors).

One of the more recent advancements made to Yahoo! Search technology-wise is the addition of Search Assist. With Search Assist, as search terms are typed, related search terms are automatically suggested, enhancing Yahoo’s user experience.

Another innovation from Stanford University came in the form of a research project called “BackRub”. The 1996 research project was initially that of Larry Page, who was soon joined by Sergey Brin while both were Ph.D. students at Stanford University. BackRub ultimately became “Google”. The name originated from a misspelling of “googol,” which refers to the number zero followed by one-hundred zeros.

The search engine originally used the Stanford website with the domain In 1997, the domain was registered, and in the following year Larry Page and Sergey Brin formally incorporated their company, Google, Inc.

By the end of 1998 Google had amassed an index of approximately 60 million pages. Although the home page was still marked as an “alpha test”, reviewers were making the argument that Google’s search results were better than those of competitors like HotBot or Excite. Google was also garnering praise for being more technologically innovative than portal sites such as Yahoo, Excite, Lycos, AOL, Go, and MSN. One of the reasons that Google found early loyalty and interest was due to its simple design and the way in which it worked. Larry Page viewed the link structure on the World Wide Web as being a huge graph. He and Sergey Brin hypothesized that a search engine which analyzed the relationships between websites would produce a better ranking of results. Their search engine took into consideration the number and the nature of web pages that link to a given page, placing the value of importance on the nature of these “backlinks”. By analyzing the output — which, for a given URL, consisted of a list of backlinks ranked by importance —Google was able to produce better results than existing techniques. Search engines at the time essentially ranked results based on how many times the search term itself appeared on a web page.

And now, back to the present: Microsoft’s $44.6 billion bid for Yahoo (which is $31.00 per share) is at a stalemate. In simple terms, Yahoo believes it is worth more than $31 a share, but it can’t force Microsoft to raise the asking price since Yahoo hasn’t (yet) been able to find a so-called “white knight”. Similarly, Microsoft doesn’t want to move away from what it views as being a fair offer.

Among the white knights that Yahoo has met with are News Corporation Online (News Corp Online) and Time Warner. Yahoo was unable to make a deal with News Corp Online. The parent company, News Corporation (News Corp), is still digesting Dow Jones and New Corp’s chairman and managing director, Rupert Murdoch, reportedly does not want to get into a bidding war with Microsoft

Time Warner, who owns AOL, may be a stronger ally than News Corp Online. Yahoo and AOL are similar in many ways: both are quite strong in webmail, instant messaging, and online display advertising, and both are legacy companies, having come to prominence during the dot-com gold rush of the late 1990s. Additionally, Google owns 5% of AOL and Yahoo and Google have a similar “friendly” ethos and openly embrace open source.

However, one week after meeting with AOL, Yahoo met with Microsoft. For the moment, the stalemate continues. With one company whose strength lies in productization, another whose strength lies in amalgamation, and another whose strength is innovation, what happens next? What could happen to the current search technology should a YaSoft/MicroHoo union occur? What, if anything, does all of this mean?

Our next installment will try to answer that very question.

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