There has been a flurry of news surrounding both Microsoft’s Bing and the UK’s Yell organisation in the last two weeks. Firstly, at the end of last week, Microsoft’ Bing and the Yell organisation announced that they were doing a deal to form a “Broad, global strategic alliance, taking advantage of their complementary strengths.” This deal is intended to bolster the performance of both by giving Microsoft better sales support in the UK and Latin America and by Yell benefiting in some way in the UK results of Bing. Here’s the FT.com’s story.
At more or less the same time, Yell also announced a deal with Bazaarvoice. Apparently, the Bazaarvoice deal will bring “enterprise social management to small and medium businesses across the globe.” Cough.
This was announced before the results of both organisations came out later in the week. Microsoft was able to announce a stellar performance with record revenues of $69.94 billion and a 23% jump in profits to $23.15 billion. Outstanding. However, the search arm of the business, namely the Online Services Unit, increased sales by 16.5% but managed to post a whopping loss of $728 million — all a result of trying to do everything it can to keep up with Google. Here’s the BBC summary of Microsoft’s results.
So the Bing part of the Bing-Yell deal is losing $728 million per year — what about the Yell part? Back to the FT.com for their descriptive headline, “Poor print advertising revenues drag on Yell.“. What an understatement. Yell’s first quarter turnover dropped by 11%, the number of print advertisers dropped 7.9%, the average revenue per print advertiser fell 8.7%, turnover from print and directory revenues dived by 18.5%, even the digital internet directory saw turnover fall by 7.1%. Is it any wonder that shares dropped 13% in value bearing in mind that Yell still has a debt burden of £2.7 billion to service?
So what’s the real story? The real story is that Yell is that the print side of Yell’s business is dying on its feet and Yell has moved online extremely late in the day. The only bright spark in Yell’s figures was its non-directory digital services — but it was tiny in the context of the total business. Meanwhile, it’s partnering up with everyone it can based on its historic print directory virtual monopoly — a monopoly which does not exist for it online. Yell itself has said that its turnround plan will take four years!
Back to that deal with Microsoft’s Bing. Basically, in return for Yell selling cloud services and Microsoft software to its customers in the UK, Spain and Latin America, Bing will help Yell in some way not specified with “search solutions” which the FT.com interprets as “favouring Yell in Bing’s results.”
The Microsoft-Yell deal is a deal of desperation in my view and one which ultimately lays bare the weaknesses of both organisations — both struggling for UK share.
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