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MicroHoo Euro View: Still Miles Behind Google

European ad buyers welcome the Yahoo-Microsoft (NSDQ: MSFT) search-and-ads deal as enhancing competition – but the mountain the pair have to climb there is even higher. In paid search, Google (NSDQ: GOOG) has 78 percent of US ads, but more like 92 percent in western Europe, Ballmer acknowledged in Wednesday’s conference call.

The new partners’ share of US search queries (Google 63.2 percent, Yahoo (NSDQ: YHOO) 17.2 percent, Microsoft 9.40 percent – Nielsen, May ’09) looks almost respectable compared with that in Europe, where Google enjoys a whopping 83.89 percent of UK searches (Yahoo 5.43 percent, Microsoft 3.28 percent – Nielsen, June ’09).

Combining the two still gives MicroHoo only a paltry 8.71 percent of UK searches, and even less elsewhere on the continent. That’s not enough to challenge Google on search itself, and may not be enough to realise significant gains from what’s left of the paid search market to fight over.

An antidote to Google?: Rebecca Jennings, Forrester’s principal London analyst says: “This deal should allow Yahoo! to give up its drive to to beat Google, and concentrate on the elements it does do better – display media and social media – devolving the competition and the significant investment involved off to Microsoft …

“While this won’t immediately worry Google … this will create a more viable second-string player in all markets, giving interactive marketers a significant, credible alternative/additional outlet for their search spend, or at least a better incentive to run trials outside of Google … This deal should help convince even the most stubborn budget-holder that spreading their money outside of Google would be beneficial.”

‘Impact will be minimal’: But Lyndsay Menzies, COO of Bigmouthmedia, one of Europe’s big search marketing agencies, says: “Given the alarming dominance that Google has held over the market for so long, the prospect of a serious challenge to their position is good news for everyone. Although the impact in the UK will be minimal.

The firm’s search head Andrew Girdwood: “We will have another credible search engine to consider for paid search budgets. That may result in some instability as bid management platforms adapt to cope with the new landscape, but it will help keep cost-per-click prices down. But if Bing is only going to supply Yahoo with organic results, then it still means Yahoo is out of the search game. They