Microsoft Ballmer: Google Biggest Opponent To Yahoo Deal

Microsoft CEO Steve Ballmer said he expects Google, not antitrust authorities, to provide the stiffest competition to its search and search ad deal with Yahoo, which Microsoft and Yahoo formalised on 29 July.

In the deal, which the companies expect to close in early 2010, Microsoft’s Bing search engine will power Yahoo’s search. Yahoo will become the exclusive worldwide relationship sales force for both companies’ search advertisers. See live blogging notes here at Search Engine Land.

The deal is aimed at improving both companies’ chances in the search engine market versus Google, whose 65 percent share leads the world. Microsoft and Yahoo hold 8.4 percent and 19.6 percent, respectively.

During a conference call to discuss the 10-year deal, Ballmer was asked what sort of opposition Microsoft expected to face as it seeks to spur the Yahoo deal toward approval in early 2010.

After a pause, Ballmer said he expected to face opposition from Google. However, in a moment that recalled how characters in the Harry Potter book series can’t bring themselves to say the name of the evil lord Voldemort, Ballmer didn’t explicitly say the name of the search engine giant. Of course, that didn’t stop him from taking a shot at Google in his reply:

“We suspect we will face some opposition from the—I would say competitors—but it’s really the competitor who may not like more competition because we actually think this is one of those cases where us coming together will actually provide more effective competition to the market leader, not less. So, certainly we would expect the competitor to be aggressive.”

Ballmer also addressed potential antitrust regulatory concerns:

“Now, obstacles … I don’t know, we think we have a good case on how this improves competition in the market. It’s good for consumers, the advertiser and the publisher, and obviously we’ll be called upon to present that case in D.C. and Brussels and other places, but it’s all been looked at extensively by counsel both at Microsoft and Yahoo.”

Ballmer then kicked it over to Microsoft’s and Yahoo’s legal counsels to chime in. Brad Smith, senior vice president, general counsel and corporate secretary for Microsoft, jumped at the chance to defend Microsoft’s deal with Yahoo. He had no qualms about saying the name “Google,” but couched it by saying, “a company like Google.”

“We look forward to moving forward very quickly to provide information to the antitrust authorities in Washington and in Brussels and in other places around the world. We’ve been working together. We expect to start the filing process in Washington, D.C., next week. As Steve said, there is a compelling case that this is going to increase competition. We anticipate that advertisers are going to recognize the better value that this generates. Web publishers are going to recognize the better generation that this is going to unleash.

“As to what a company like Google will do, that will obviously be their call. They have 78 percent of the market worldwide for paid search. I don’t know of any other instance where a company with that kind of market share endeavor sought to oppose a deal where two smaller companies have come together, but they’ll make their own decision and we’ll look forward to the debate.”

That’s right. You just read Smith call Microsoft a smaller company than Google. In terms of search, Microsoft’s 8.4 percent compared with Google’s 65 percent share is small to the point of embarrassment.

But Google has a shade under 20,000 employees. Microsoft has over 90,000. Google did $21 billion (£13bn) in sales last year. Microsoft notched $60 billion. Microsoft is not smaller.

Update: How is Google taking this Microhoo announcement? A Google spokesperson told eWEEK: “There has traditionally been a lot of competition online, and our experience is that competition brings about great things for users. We’re interested to learn more about the deal.” AllThingsDigital has other thoughts on the matter.

Google isn’t the only one that might have concerns. The Center for Digital Democracy told eWEEK last week that Microsoft and Yahoo should expect privacy and consumer groups to “vigorously press” regulators to closely examine the deal.

At the least, the CDD wants regulators to impose a series of tough conditions on data collection practices, including making their online marketing systems more transparent.