Here in the United States, Microsoft (MSFT) may have gotten the better of Google (GOOG) with its Yahoo (YHOO) alliance. But it's a different story in Japan, where Yahoo has just entered into a new partnership with Google, to the clear fury of Microsoft executives.
Under the terms of the new alliance, Yahoo will use Google’s search and advertising platform technology to power its site, matching Google’s superior tech with its own, highly popular content portals. In Japan, Google hasn’t quite enjoyed the success it has elsewhere around the world, trailing Yahoo in search dominance. This new deal makes it the cock of the walk; according to the New York Times, Google and Yahoo together comprise 90.5 percent of the Japanese search market. (If you’re wondering why Yahoo would cut against Microsoft like this, the answer is that Yahoo is actually a minority owner in its own Japanese property; the biggest shareholder is the cell phone company SoftBank.)
And that has left Microsoft sputtering with rage. The software giant has put a lot of money down on creating Bing, siding with Yahoo in America, and fighting back against the overwhelming dominance of Google. The Yahoo alliance was particularly crucial, as Bing’s technology suddenly powered more than 20 percent of the American search market, which gave Microsoft at least a fighting chance to compete. Now, Google has essentially done the same thing in Japan, but this deal has left it in control of virtually the entire market.
“This agreement is even more anticompetitive than Google's deal with Yahoo in the United States and Canada that the Department of Justice found to be illegal,” Microsoft general counsel Brad Smith wrote in a statement to eWeek. “It means there will be no search competition in Japan and that Google will end up controlling all personal search information for all Japanese consumers and businesses.”
Obviously, neither Google nor Yahoo Japan feel the same way. Representatives from both companies have rushed to defend the deal, claiming that while Yahoo will use Google technology, its advertising business will remain separate, and the two firms will still compete for the one thing that really matters: ad revenue. And according to the Wall Street Journal, Japan’s lead anti-trust official, Fair Trade Commission Secretary General Takahide Matsuyama, agreed. “Based on those conditions, the partnership wouldn't immediately cause any problems related to antitrust regulations,” he announced at a press conference.
Again according to the Journal, anti-trust experts are as surprised as Microsoft that the Japanese government so blithely allowed this deal to go through; one Japanese law professor went so far as to say the government just doesn’t understand the search business. Nevertheless, it’s clear that Google outmaneuvered Microsoft in one of the most lucrative and sophisticated markets in the world. No wonder they’re pissed.
