July 30, 2009 8:21 pm

Partnership urged to take rapid action

Advertising agencies are urging Microsoft and Yahoo to accelerate their search partnership if the two technology companies are to counterbalance the dominance of Google.

Sir Martin Sorrell, chief executive of WPP, the world’s largest communications group by revenue, welcomed the long-awaited deal, unveiled this week.

“It’s good news for clients, good news for agencies and good news for regulators,” Sir Martin told the Financial Times. “But the quicker it happens the better … It is important that Bing instantly moves its market share.”

Others agree that the planned two-year integration process – which will see Microsoft’s Bing search engine power Yahoo’s search pages while Yahoo sells search ads on both – is too long.

“The risk in those two years is making sure that Microsoft and Yahoo don’t lose focus,” said Nick Beil, chief executive of Performics, the search engine marketing agency which Publicis, the French agency group, bought from Google last year. “Google will continue to innovate.”

That means that Performics will not shift its spending pattern – in which Google receives “the lion’s share” – in the near term, Mr Beil said.

Faced with a more formidable competitor, Google may increase its focus on search even more.

That would be good news for traditional agencies, who have been wary of Google’s forays beyond internet advertising, such as into TV and radio.

The combination of Yahoo and Microsoft’s search efforts will be particularly important to smaller advertisers.

Small and medium-sized businesses have not always found it easy to move from buying a listing in a directory to the technical aspects of search marketing.

“For a lot of mid-sized and smaller companies, the additional effort of managing campaigns across three different search engines wasn’t worth it,” said Alex Hoye, chief executive of Latitude, an independent search agency. “In the US it certainly becomes worth it [now].”

The same may not be true elsewhere. Google’s dominance in the UK and parts of western Europe may be little dented by an enlarged Bing. But Microsoft’s strong balance sheet will leave it better placed to change that than Yahoo would.

If the alliance succeeds, a stronger competitor to Google could accelerate the decline in costs of buying search terms already initiated by the downturn.

“From our point of view and for the broader technology and media industry it’s a sigh of relief,” said Mike Parsons, managing director at Tribal DDB, an Omnicom-owned digital agency.

The increased importance of Bing could also make Razorfish, Microsoft’s digital agency, more appealing to potential acquirers. Microsoft has begun a second round of due diligence ahead of a potential sale of Razorfish, with WPP, Publicis and Dentsu all mulling a deal, according to people familiar with the process.

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