In a hugely interesting Piper Jaffray research note reported in Barron's, analyst Gene Munster suggests a few strategies for Yahoo's incoming CEO Carol Bartz, among them that Yahoo should acquire a major media company like The New York Times (good idea), but also that it should outsource search to Microsoft.
Search has never been a core competency for Yahoo, and outsourcing will both generate short-term cash and allow Yahoo to focus on content.
Not core? If search hasn't been core for Yahoo, for whom is it core? Google, yes, with, but is Google the only one that has search in its DNA?
Munster's research note suggests that Microsoft can claim search DNA, but its track record doesn't necessarily confirm this., has search in its blood, but enterprise search, not Web search.
I would have thought that Yahoo, with its second-place market share in search, should be credited with having interest and competency in search too, but Munster apparently disagrees. Does this leave us with Google versus everyone else, with "everyone else" roughly translating to "Microsoft"? This doesn't seem like a very healthy market dynamic, and certainly not one that will generate real innovation in search.
Perhaps it's true that the recession will spur Google on to innovation, but perhaps there are other factors that will encourage competition, .
Regardless, it's as worrisome to see Google owning nearly 70 percent of the search market as it was for Microsoft to own more than 90 percent of the desktop operating system and productivity suite markets. Google needs competition.