by Mielle Sullivan, Janus Networks

I’ve been monitoring the coverage on the Yahoo Microsoft deal since it was announced on July 29th and I am a little puzzled why so many analysts and reporters seem think the deal is so positive for Microsoft and so negative for Yahoo. From what I can see of the companies’ strengths, Yahoo is loosing nothing that wasn’t draining money and Microsoft’s ability to power search is still unproven

After the announcement, Yahoo’s stocks fell and and several analysts bemoaned Yahoo’s surrender of “data” that, according to these analysts, is where the real money lies. I am not sure what data they are speaking of. If they mean search algorithm data, it seems clear that, for the last several years, Yahoo has been unable to use the search algorithm data it has to effectively gain in the search market. If instead the analysts mean user or cookie data — used for behavioral targeting of ads — the actual advertising power of this data is still unproven for the vast majority of advertisers. Behavioral targeting could also be outlawed if some law makers have their way.

For their part, Yahoo and Microsoft are being vague as to who will control what data. I suspect this is for two reasons, the most obvious being that they don’t want to give away plans to competitors. But also because part of what I believe they have planned might raise the same privacy concerns behavioral targeting does for some. In early May, Yahoo announced a service that allows advertisers to target display ads to users based on recent search queries. I’d be willing to bet Yahoo will continue that service with Bing results. Like behavioral targeting, it is a new, unproven and potentially controversial technology, but it could be very lucrative.

Let’s also not forget that Bing has yet to prove itself. It has seen a decent beginning in user volume, but Microsoft is spending $100,000,000 in advertising. Who knows if those users will continue the habit after the buzz dies down. If they don’t, Microsoft is left with maintaining a huge infrastructure at a loss.

The bottom line is that Yahoo is deciding to focus on display advertising, a field in which it clearly excels. It already has one of the largest display advertising networks on the web. If it hones new technologies that improve targeting, it could ratchet up profits significantly.

Both companies have a lot to prove if the deal is to create lots of value for either. But considering the strength of the Google habit and the youth of Bing, I am just not at all certain Microsoft has the easier road ahead.

You can contact the author at press@janusnetworks.com

Visit our blog: http://janusnetworks.wordpress.com/

follow us on twitter: JanusNetworks