Now that Yahoo & Microsoft have signed a ten year deal, we’ll see Bing replace their own search engine shortly. Yahoo will focus on media and MSFT will focus on search. What does this mean for the search landscape? Will Yahoo & MSFT do more deals together or is this it? Now that MSFT has their teeth into YHOO will they eventually be able to purchase them or do they even want to anymore. Lets take a look at their deal…
According to the Alley Insider the deal terms were as follows:
The key terms of the agreement are as follows:
- The term of the agreement is 10 years;
- Microsoft will acquire an exclusive 10 year license to Yahoo!’s core search technologies, and Microsoft will have the ability to integrate Yahoo! search technologies into its existing Web search platforms;
- Microsoft’s Bing will be the exclusive algorithmic search and paid search platform for Yahoo! sites. Yahoo! will continue to use its technology and data in other areas of its business such as enhancing display advertising technology;
- Yahoo! will become the exclusive worldwide relationship sales force for both companies’ premium search advertisers. Self-serve advertising for both companies will be fulfilled by Microsoft’s AdCenter platform, and prices for all search ads will continue to be set by AdCenter’s automated auction process;
- Each company will maintain its own separate display advertising business and sales force;
- Yahoo! will innovate and “own” the user experience on Yahoo! properties, including the user experience for search, even though it will be powered by Microsoft technology;
- Microsoft will compensate Yahoo! through a revenue sharing agreement on traffic generated on Yahoo!’s network of both owned and operated (O&O) and affiliate sites;
- Microsoft will pay traffic acquisition costs (TAC) to Yahoo! at an initial rate of 88 percent of search revenue generated on Yahoo!’s O&O sites during the first five years of the agreement; and
- Yahoo! will continue to syndicate its existing search affiliate partnerships.
- Microsoft will guarantee Yahoo!’s O&O revenue per search (RPS) in each country for the first 18 months following initial implementation in that country;
- At full implementation (expected to occur within 24 months following regulatory approval), Yahoo! estimates, based on current levels of revenue and current operating expenses, that this agreement will provide a benefit to annual GAAP operating income of approximately $500 million and capital expenditure savings of approximately $200 million. Yahoo! also estimates that this agreement will provide a benefit to annual operating cash flow of approximately $275 million; and
- The agreement protects consumer privacy by limiting the data shared between the companies to the minimum necessary to operate and improve the combined search platform, and restricts the use of search data shared between the companies. The agreement maintains the industry-leading privacy practices that each company follows today.
On the deal conference call Danny Sullivan asked,
Can you explain what will happen to Yahoo news search? Yahoo directory? Is paid inclusion going away? Search is spread out all over the place.
Carol Bartz:
Internal search is some of the innovation we’re looking at doing. That’s btw one of the issues we really needed to work out. Paid inclusion? Going to decide on that later. Still some things to work out. We have full flexibility on what to do inside our site. That’s the important thing. Lot of value in being able to search our properties and to add different search experience.
Steve Ballmer:
We’re anxious to see Yahoo make full advantage of our search tech in various parts of its network; now Yahoo will figure out over time where that will play.
So I am wondering how far down the rabbit hole these guys will go. Will we eventually see Bing Maps powering Yahoo Local? Or Bing Local powering Yahoo Local.
Who’s next on MSFT’s acquisition list? Google just sold back their stake in AOL to TimeWarner. Perhaps MSFT will try to acquire their search engine deal next. AOL search is small compared to Yahoo or Bing but in the game of numbers every little bit counts and AOL is a large customer of Google’s so getting them would be a double prize.
Latest figures by Nielsen market research company for the US market: Google 63.2%, Yahoo 17.2%, Bing 9.4% (actually Bing #s were Microsoft’s MSN/Windows Live). So Search market will look more like Google 63%, Bing 26%, AOL/ASK and Others 11%.
