• Will Microsoft-Yahoo be competition for Google?
• Will this be a positive deal for advertisers?
• Will this be a positive deal for consumers?
• What does the combination bring that’s unique?
• What are the challenges of the Microsoft-Yahoo combination?

Below is a lively discussion – with occasional disagreement — regarding this groundbreaking news.

Will Microsoft-Yahoo be competition for Google?

Chris Paradysz:  Absolutely.  They already are.  Look at how distracted Google is.  Bing’s market penetration has already dramatically increased since their re-launch.  $100 million buys a lot of marketshare, and it’s not fading like a bad idea or another Taylor Hicks American Idol winner.  Products being equal, I put my money on companies with the best marketing, not technology, to impact and sustain share growth.  Let’s remember that it’s impressions, eyeballs and consumers that drive the revenues.  Advertisers have the bucks, but the dollars don’t work if people aren’t searching.  I believe in Google and their offerings.  They are spectacular and, so far, a much better solution for advertisers and consumers.  They have both of these two customers in the bullseye so their audience should grow.  The best companies create categories for themselves and redefine the rules.  Look at what Apple did to the mobile phone industry.  Better, check out what Google is attempting to do with their cloud computing solution to rival Microsoft Windows.  I believe in Google, and their success matters a lot to a lot of people.  What’s intriguing about this battle is that Bing, and now Yahoo, is picking at Google’s strengths…their core categories.  At its core, Google is a classified ad business with strength in the categories with the largest budgets.   That’s precisely where Bing’s search engine is focused.   Bing is a threat.  Bing/Yahoo is a more formidable threat.  We just don’t know how much.

Suzy Sandberg:  No.  Both Microsoft and Yahoo have played catch up for years to Google’s innovations.  Some of the innovations have come with a lot of hype (Live Search?  Panama?  There are others…) that not only never made a dent in Google’s market share but gained negative feedback from advertisers.  Years ago, MSN yielded a nice volume of sales from paid search but then they ”fixed it” to “improve it,” and all the sales disappeared.  This has been the pattern with both companies.  Also, Google has strategically aligned themselves with DoubleClick in the hopes of tying display to search marketing which, when and if that happens, will be HUGE.  The fact that Yahoo and Microsoft are both keeping their own display teams and not integrating them in this deal makes me assume they will be playing catch up once again after Google nails down the integration.  In fact, with two display teams/strategies and one search engine, it will be complicated to integrate and even more complicated considering that this is a 10-year deal.

Will this be a positive deal for advertisers?

Chris Paradysz: Yes.  The consolidation of two relatively small competitors will create a much more reachable and targetable audience in both search and display, radically improved customer service for advertisers due to Yahoo’s sale force, and a far better technology platform which plays to Microsoft’s strengths.   Plus, I’m also encouraged that Google will now have very real price competition which should be good for both advertisers and the search engines, too.  In a tough economy, it might just be the match that lights the growth flame.

Suzy Sandberg:  Advertisers will benefit from this deal by having only two search platforms from which to launch their ads (currently all three have unique specs and rules).  The Yahoo sales team, which is staying, is superior to Bing’s which is another plus, and the Bing Ad Center platform is far superior to Yahoo’s, so most of the changes will be positive.  What is unknown is if prices will increase now that there is less competition, and that would be bad.

Will this be a positive deal for consumers?

Chris Paradysz: I think so.  Although it is consolidation, I see it as the combination of two strong brands that have significant marketing dollars to back platform choice.  This will drive demand and likely create much more churn for the search engines, but I think the consumer gets real choice.

Suzy Sandberg:  Yes.  While the Bing search engine has been more hype than substance and the awareness is minimal (except for those in the internet marketing business), among consumers it is a cleaner, more thoughtful search experience than Yahoo’s, so it will be good for consumers.  That said, I do not believe Bing will make any significant inroads in taking market share away from Google now or in the years to come.

What does the combination bring that’s unique?

Chris Paradysz: It brings two premier, well-known and respected brands together that now should be able to bring a real solution and meaningful scale that has eluded both of them.  With general ad budgets rapidly moving to ROI-based, targetable media, display advertising should be the victor.  That bodes well for the rising star, Google, and the current front-runner, Yahoo.

Suzy Sandberg:  For one, Microsoft finally has some market share in search.  Secondly, it’s the first time Google will have a much larger single competitor nipping at their heels. With Google looking to introduce an operating system in the near future, the battle between these two companies will continue to escalate.

What are the challenges of the Microsoft-Yahoo combination?

Chris Paradysz:  Unraveling old deals and creating new ones worry me a lot.  Getting Bing’s technology platform integrated quickly is crucial so advertisers find success so they keep their dollars invested.  Privacy.  A meddling government.  Uniting the management teams under a single mission.  Carol Bartz has had great success elsewhere.  This is her deal, and keeping the troops aligned will be important or this will quickly fall apart.

Suzy Sandberg:  In lieu of a formidable search engine competitor stepping in, there will be questions about consolidation in the industry and monopoly.  There will also be more layoffs at both companies.

Chris Paradysz is CEO and Suzy Sandberg is President of PM Digital.