December 23rd, 2002 Yahoo announced an agreement to buy Inktomi for $1.65 per share in cash, which equals about $235 million for the company.
During Yahoo's history they have out sourced their search engine functions to a number of different companies such as AltaVista, Inktomi and most recently Google. This recent acquisition signals a major change that could affect the balance of power on the net.
Exactly how Yahoo will be incorporating the Inktomi search engine into their site is yet to be seen. We do, however, expect them to make use of Inktomi's search engine, in limited testing, very soon. There is no doubt that Yahoo of late has been feeling the competition from Google. We suspect that may be what prompted this sudden move.
Yahoo's management appears determined to produce the best search results possible. Therefore we doubt the purchase will lead to an immediate boot for Google. We've heard directly from Yahoo's staff that relevant search results is top priority – they do not want to lose users based on sub standard search results.
Based on that, we believe they'll soon begin testing Inktomi search results and working on relevancy factors with an eye toward getting them high enough to warrant making the change to what is now their own product at some point in the future.
It's clear that Yahoo intends to drop Google sometime – we just don't know when. What isn't clear is how this purchase will affect relationships with Inktomi's current customers. Here's a quick list of their OEM Web Search partners:
About.com
Bluewin.ch
Blueyonder.co.uk
Espotting.com
www.fi
Goo.ne.jp
HotBot.com
Looksmart.com
MSN.com
Overture.com
Soneraplazi.fi
Terra.cl
Tocc.co.kp
It's likely Yahoo/Inktomi will lose at least some of these partners and engines like Fast, AltaVista or Google will jump in to fill the void.
The big question is what will MSN do?
At this point nobody knows, we advise to continue to list your sites in Inktomi's index. When Yahoo switches over from Google the traffic jump should be significant.
Furthermore, even if MSN drops Inktomi the traffic gain at Yahoo should more than make up for the traffic loss at MSN. And, in case you're fuzzy on the details, we remind you that MSN search results now use MSN ads, Overture PPC, and LookSmart PPC (in that order) before the Inktomi results show up.
AltaVista Update
