WebGuru’s Blog about Digital Life

By Scott Morrison
Of DOW JONES NEWSWIRES

SAN FRANCISCO -(Dow Jones)- Yahoo Inc. (YHOO) is hoping to boost revenue and steal market share from rival Google Inc. (GOOG) with a new plan that opens its search technology to third-party developers who want to build their own search engines.

The initiative lets partners tap into Yahoo’s back-end search technology - the algorithms and infrastructure that power its search engine - as a Web service, but allows them to control the presentation and ranking of the search results. Those partners, in return, would be required to run Yahoo search ads on their pages, with the two sides sharing revenue.

The Sunnyvale, Calif., company announced the program, dubbed Build Your Own Search Service, or BOSS, early Thursday.

Yahoo, which is struggling to remain an independent company, hopes the initiative will prove attractive to an emerging breed of vertical search engines, which cater to niche markets, as well as so-called destination partners such as social networks and e-commerce sites that want to provide users with specific search capabilities without driving them off their pages.

But analysts said the success of Yahoo’s initiative would depend largely on whether it could sign up partners that draw a sizable amount of Internet traffic.

“They will need some significant partners to step up to the plate and leverage the BOSS platform and monetize the traffic in order to really chip away at Google’s increasing market share,” said Evan Andrews, analyst at Jupiter Research.

Notably absent from the BOSS launch announcement was such a high-profile partner. Yahoo said it so far had partnered with semantic search start-up Hakia, as well as Medium Social Search, which ranks results by evaluating the interactions or contributions of users. Yahoo said it expected to announce larger partnerships in the next few months.

The initiative comes as Yahoo struggles to make the case to shareholders that it should remain an independent company and be given a chance to get its business back on track. Activist investor Carl Icahn is hoping to oust Yahoo’s board at the company’s Aug. 1. shareholders’ meeting, at which point he would restart talks to sell the Internet giant to Microsoft Corp. (MSFT).

The announcement also follows Yahoo’s move last month to strike a search advertising outsourcing deal with Google, which has nearly 62% of the U.S. search market, compared with about 21% for Yahoo.

Yahoo, which struggles to make as much money per search as Google, said the agreement could eventually generate up to $800 million in annual revenue. But many Wall Street analysts said the deal would do little to stem the steady erosion in Yahoo’s search market share.

Yahoo’s BOSS initiative is part of a trend among Internet companies to transform their sites into software development platforms in hopes that they would be more attractive to third-party developers, who could create applications to lure even more Internet users and advertisers.
Yahoo said a key advantage is that partners would no longer need to spend as much as $300 million to develop the algorithms and build out the physical infrastructure now required to enter the search market.

“If you have an idea for search and a particular audience for a search experience, you can enter the marketplace without the upfront cost of entry,” said Prabhakar Raghavan, chief strategist for Yahoo’s search unit.

Shares in Yahoo closed down more than 3% at $23.82 on Wednesday.
-By Scott Morrison, Dow Jones Newswires; 415-765-6118; scott.morrison@dowjones.com