Thursday, 27 August 2009

BT Yahoo Chooses Google Search

In an amazing development in the UK, Google search has just replaced Yahoo’s web search engine for natural and sponsored results on BT Yahoo, the online portal for BT Broadband users that is run by Yahoo. The co-branded BT Yahoo service was initially launched in Sept 2003 and provided a wide-range of Y! services to BT Broadband users, including search. The new service will continue to provide Yahoo services such as email, but the Y! search engine has now been replaced by Google’s.

Google and Yahoo tried to agree a deal in 2008 in the US to replace Yahoo sponsored listings with Google’s higher value listings, but the deal ran into Justice Department issues and didn’t complete. This deal in the UK clearly goes one step further by replacing not only Yahoo’s sponsored results, but the whole Yahoo web search engine i.e natural results, with Google’s. Image and Video results appear to be still coming from Yahoo though.

The deal makes good sense to BT, the leading broadband provider in the UK with 35% market share of the market. Unlike in the US where Microsoft and Yahoo have respectable shares of the search market, the situation in the UK is very different with Google totally dominating the UK search market with over 90% of the market. By replacing Yahoo’s search engine, BT are hoping that overall search usage will increase by providing users easy access to the #1 service in the UK. By doing so, BT should also benefit from Google’s higher Revenue Per Search (RPS), which is believed to be up to 2-3x that of Yahoo’s. It will be interesting to see if any of Yahoo’s other ISP partners such as Rogers or SBC follow suit.

It represents a strange move for Yahoo on the back of the 10 year search deal that was announced with Microsoft last month, that will result in Microsoft Bing becoming the default search engine on with Yahoo’s sales teams selling the ad inventory on both services. I wonder if Microsoft knew when they signed the deal that 35% of broadband users in the UK would be directed towards Google’s search engine, rather than the new Bing/Yahoo search engine when they signed the deal? Some UK advertisers may divert even more of their spend over to Google now that Yahoo will no longer represent BT’s users, which wouldn’t be good for Microsoft’s/Yahoo’s ambitions in the 2nd most valuable internet market in the world.

Google must be extremely happy to have sewn up BT’s users, the leading broadband provider in the UK with 35% market share. Capturing BT is a big coup for Google and they now have deals with all of the big ISPs in the UK.

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