Last updated: 10:30 a.m. PT, Nov. 19 with Facebook's statement.
Yahoo and Facebook in a grand search alliance? This news from unnamed sources came from The Sunday Telegraph, reporting that Yahoo CEO Marissa Mayer and Facebook COO Sheryl Sandberg have been talking about the two companies working together on a search engine.
Some industry watchers are throwing cold water on the report. Kara Swisher of All Things D, who has a good track record covering Yahoo's ups and downs, said that her sources indicated that the two Silicon Valley companies are not currently in talks regarding a search partnership, and Microsoft isn't about to let Yahoo out of its long-term search contract.
Facebook issued a statement Monday denying the report. "People expect a better search experience on Facebook. We are working on improvements to better meet those expectations but are not in talks to enter into a new search partnership."
That said, Mayer and Sandberg are former colleagues at Google and understand what search can do to super-charge a business. Mayer is looking for ways to revive Yahoo's products and engineering focus since she took the CEO job in July. The two companies recently resolved their patent spat just prior to Mayer coming on board, and Yahoo was an early to integrate with Facebook Connect.
More to the point, Mark Zuckerberg has been dropping hints about search over the last few months. Here's what:
"We do a billion queries a day and we aren't even trying. Mostly trying to find people or brand pages or apps. There is a big opportunity in search, evolving to giving a set of answers to a specific question and Facebook is uniquely positioned to do that. For example, 'Which of my friends or friends of friends work in a company I might like to work at?' At some point we will do it."
He further elaborated on his notion of search a few weeks later in an interview with. Zuckerberg said that Facebook is "uniquely positioned" to answer such questions, but not the kind of questions that Google or Microsoft's Bing are specifically designed to answer.
Zuckerberg wants to provide a way to navigate the entire Web outside of Facebook's walled garden by harnessing the "trillions of connections between friend requests and all the content that's being pushed into the system."
"At some point, that will start to be a better map of how you navigate the Web than the traditional link structure of the Web. I think there's an opportunity to really build something interesting there," he said.
That all sounds interesting, but how Yahoo can help bring Zuckerberg's search vision to life? Currently, Yahoo outsources its search to Microsoft. That deal hasn't gone so well financially, and Yahoo may try to exit the deal next year (see Danny Sullivan's coverage of Yahoo-Microsoft search). Mayer's former employer has expressed interest in replacing Microsoft for that job, but that is legally tricky given Google's near monopoly in search. The door could be open for a Yahoo-Facebook alliance, but it could take years to create a competitive search engine. It may be that Microsoft is not totally out of the picture.
Search is a subject that is core to Mayer, from her 13 years at Google. It will generate about $40 billion in ad revenue for Google in 2012, compared with a few million for Yahoo. She expressed a vision for search that sounds similar to what Zuckerberg has said about the subject, a kind of semantic search that answers questions. She described her ideal search engine to IDG News Service way back in 2009:
It would be a machine that could answer that question, really. It would be one that could understand speech, questions, phrases, what entities you're talking about, concepts. It would be able to search all of the world's information, [find] different ideas and concepts, and bring them back to you in a presentation that was really informative and coherent.
There are a lot of different aspects of research that need to go into building that search engine. You need to understand speech. You need to understand images. You need translation, so you can find the answer regardless of what language it's written in. You need a lot of artificial intelligence to be able to analyze what information is relevant and synthesize it. You need a great user interface and user experience to put it in context. And you probably need a certain amount of personalization, so the search engine relates to the person, to their background, what they already know about, what they looked for last week.
The "search engine relates to the person, to their background, what they already know about, what they looked for last week" is Mayer's summary that is close to how Zuckerberg thinks about search. Everything that Facebook does isin Zuckerberg's view.
The root of what Yahoo and Facebook could do would be social and mobile -- a social search engine that is ideal for mobile usage. Combining data gleaned from Yahoo's 700 million users and Facebook's 1 billion users (and resolving any privacy issues in such a plot) would give a social-oriented search engine centered around answering questions a lot of information to process, refine and monetize.
While the two companies might be motivated by the engineering challenge, the opportunity to create a new kind of search engine and give Google a cause for concern, there is a massive amount of money is search. Whether the two companies join forces remains a question at this point, but the opportunity is real and could bring immense profits for both at Google's expense.