Microsoft and Yahoo struggle to catch up with Google

Another week, another demonstration of Google’s dominance. While Microsoft and Yahoo have posted poor Q2 results this week, with online ad revenues down by 14% and 16% respectively, last week Google revealed its revenues were up 3% for the quarter.
It’s clear that, despite the economic slowdown, Mountain View’s finest are still doing something right. That something, of course, is search, which these result demonstrate the others are still not making work.
The announcements of Yahoo’s and Microsoft’s online revenue shortfalls has inevitably led to more discussion over whether they’ll join forces – a saga that has been dragging on for almost 18 months now. Clearly, Microsoft will want to see how Bing affects its bottom line first. It will be encouraged by the reaction among the industry which, for the most part, has looked on Bing favourably.
However, any market share increase has so far been minimal. Microsoft hopes new initiatives will help drive this, of course, not least its forthcoming ad-funded online Office Suite. It’s move in this space was inevitable due to the increasing popularity of free offerings such as Open Office and Google Docs, so it’ll be interesting to see how Bing and other online ad services will be integrated.
Perhaps most worrying for Microsoft and Yahoo is Google’s move into the multi-million-pound ad exchange sector (nma 23 July 2009). This is an area in which Yahoo, with Right Media, is an established player but will be looking over its shoulder with concern. Google CEO Eric Schmidt has said it’s the big focus for the company, but Microsoft has said its own exchange, currently being tested, is still a couple of years off. It’s a potential goldmine for any company that gets it right.
Microsoft and Yahoo have both undergone significant changes this past year, not least redundancies and launches like Yahoo’s new home page. However, it’s clear that both still have a long way to go before they start worrying Google.