CNN/Money 
Technology > Tech Biz
graphic
Yahoo and Google: Cold War redux
Losing the Yahoo account, Google is no longer the sole superpower in search.
January 19, 2004: 12:05 PM EST
By Eric Hellweg, CNN/Money contributing columnist

Sign up for the Tech Biz e-mail newsletter

NEW YORK (CNN/Money) - When Yahoo announced its fourth-quarter earnings on Wednesday, investors drove down the stock price in part because the results weren't "boffo" enough.

But a small bit of news also released that day should appease the boffomongers for 2004: Yahoo will be dumping Google as its search technology provider sometime in the first quarter.

The move was hardly a surprise. The only question unanswered beforehand was when the company would do it. When Yahoo purchased Inktomi in December 2002, most observers saw it as a counterattack to the growing Google dominance.

Recently in Tech Biz
graphic
Techs: The hyperactive hype
Nothing compares to Yahoo!
Verizon's $1B upgrade
The wonderful world of wireless?
The lure of Salesforce

But Yahoo needed to maintain its position as the one-stop shop for all things Internet, so it partnered with Google to provide strong search capabilities while it tinkered with the Inktomi technology to suit its needs. The Inktomi technology is finally ready, so Yahoo is finally ready to cut its ties to Google, the leading search company.

"You never want to feed your competitor," says Jonathan Gaw, an analyst with IDC.

Though Yahoo's move was expected, its timing is tough for Google. It is preparing for its upcoming IPO (maybe you've heard about it?), and with Yahoo as a partner, its technology powers roughly 80 percent of all searches on the Internet. Without Yahoo, that share drops to about 55 percent -- a precipitous fall for a company preparing for its debutante ball on Wall Street.

The elimination of Yahoo as a partner "has a dampening effect" on Google's IPO plans, says Jeffrey Hirschkorn, senior analyst at Current Offerings.

But is the bloom off the Google rose before it even blossoms in full? No.

While the loss of Yahoo is a significant chink in Google's armor, the hit to the company's revenue is slight: Yahoo contributed only a small amount per year to Google and didn't serve Google's ads.

More painful will be the loss of the high-profile placement of its "search powered by Google" tags, as well as the service that Web searchers provided to the company's technology: Every time a user searches on Google, it helps the company refine its search capability.

YOUR E-MAIL ALERTS
Follow the news that matters to you. Create your own alert to be notified on topics you're interested in.

Or, visit Popular Alerts for suggestions.

Even though those losses don't directly affect Google's bottom line, the company -- and investors -- should take the change as a reminder that Google isn't impervious to shifts in the business.

For Yahoo, the move is a long time coming and builds on the momentum of its most recent earnings announcement. With in-house search technology, the company's revenue will be seen as "purer." No longer will Yahoo rely on a competitor for such an integral component of its business.

Don't forget that keyword searches make up a third of the Internet advertising market. In a way, the move also returns Yahoo to what it was before the portal craze: a great way to search for stuff on the Internet. The company had lost sight of that basic component of its business model.

"Search has become that thing that we lost and now we've found again," Gaw says. "It's a Prodigal Son."


Sign up to receive the Tech Biz column by e-mail.

Plus, see more tech commentary and get the latest tech news.  Top of page




  More on TECHNOLOGY
Why Chicago is mandating coding education
Apple profit soars on huge iPhone, Mac sales
Snapchat, valued at $10 billion, has started showing ads
  TODAY'S TOP STORIES
Apple profit soars on huge iPhone, Mac sales
Ditch the wallet: Apple Pay launches today
Ebola is a fear factor for stock market




graphic graphic

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.