It's official: Microsoft-Yahoo ink 10-year search pact; Regulator scrum begins

It's official: Microsoft-Yahoo ink 10-year search pact; Regulator scrum begins

Summary: Updated: Microsoft and Yahoo made it official on Wednesday. The two companies announced a 10-year pact where Microsoft will power Yahoo search.

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Updated: Microsoft and Yahoo made it official on Wednesday. The two companies announced a 10-year pact where Microsoft will power Yahoo search. Yahoo also becomes the sales force for Microsoft's premium properties.

The companies said the search deal will accelerate innovation and bring more value to advertisers and Web users. Yahoo and Microsoft also get to focus on their core strengths. Yahoo CEO Carol Bartz says there will be "boatloads of value for our users and industry." Microsoft CEO Steve Ballmer says the Yahoo deal gives Bing the scale to compete.

In a blog post, Bartz said:

You’ll still find search boxes all across Yahoo!, but this deal will make the difference between a great Yahoo search experience and an awesome one.

On a conference call, Bartz said that the pact allows both companies to combine forces to take on Google in search. Google has 70 percent of the search market and Microsoft will now have the rest.

Bartz added that "this deal won't happen overnight. We anticipate closing the deal by early 2010." She added that once the deal closes Yahoo will transition to Bing search in major markets three to six months after the deal closes. Migration from Yahoo's Panama ad system to Microsoft's AdCenter platform will happen in 12 months after close, she said.

Ballmer said that the additional search scale will make the ad market more liquid and close a revenue per click gap with Google.

The wild-card: Will regulators go for it?

Rest assured Google will raise a regulator ruckus. "We suspect we'll see some opposition from the competitor," said Ballmer. The companies said:

Microsoft and Yahoo expect the agreement to be closely reviewed by the industry and government regulators, and welcome questions. The companies are hopeful that closing can occur in early 2010.

That may prove to be an understatement.

Also see: Gallery: Ballmer-Bartz ink Microhoo deal

Among the key details (statement, joint Web site):

  • The deal is for 10 years.
  • Microsoft will license Yahoo's core search technologies for 10 years;
  • Bing is the "exclusive algorithmic search and paid search platform for Yahoo sites'.
  • Yahoo is the worldwide sales force for both companies. Self-serve and search advertising will be built on Microsoft's AdCenter platform.
  • Yahoo will own the user experience on its properties.
  • Microsoft will pay traffic acquisition costs to Yahoo at a rate of 88 percent of search revenue on Yahoo sites for the first five years. Yahoo will continue its search affiliate partnerships. On a conference call, Ballmer said: "We paid a high TAC rate. There's no question. He added that the upside comes as Microsoft improves relevance due to more scale. "Our upside comes as execution really builds," he said.
  • "Some Yahoo engineers may move to Microsoft," said Ballmer.
  • Microsoft guarantees Yahoo's owned and operated revenue per search in each country for 18 months;
  • After 5 years, Microsoft can retake premium ad sales back from Yahoo.
  • The implementation will occur within 2 years after regulatory approval.

Add it up and Yahoo expects an annual GAAP operating income boost of $500 million with capital expense savings of $200 million. Yahoo expects the Microsoft pact to boost annual operating cash flow by $275 million.

There are other notable moving parts. For instance, Yahoo was quick to say that the agreement doesn't cover every Web property they own. Email, instant messaging and display advertising are not included. Microsoft and Yahoo also say that they won't swap customer data except for the "minimum necessary."

Also see: With Microsoft search deal Yahoo risks becoming AOL

Topics: Browser, Microsoft, Social Enterprise

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132 comments
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  • Pork Chop Date

    We used to joke about a particular person being so ugly their parents would have to hang a pork chop around their neck to attract a date.

    That's kind of the same feeling I get about Bing. Microsoft has to pay the declining, distant second place in web search to use their technology to get people to use it.

    Maybe MS should try the pork chop.
    Chad_z
    • It's how they roll

      Whenever Microsoft can't develop a successful product, they buy a company, make it their own, and drive the original buy-up into the toilet.
      rag2
      • Sort of like every business!

        :)
        Sleeper Service
        • I doubt it

          M$ is a special case. Along with Intel and Google
          Wintel BSOD
          • The only 'special' thing here...

            ...is you.

            Everybody's doin' it!
            Sleeper Service
          • Don't bother to explain it to him..

            Some people just hate companies for the sole purpose of hating it.
            Michael Alan Goff
          • Some people just hate companies

            And Google is starting to be on that list. It's way to big and way to intrusive.

            Right now MS can't even do a lot of things that I think are ok that it needs to do because it is seen as the source of all evil by some, and just to big with to much of the market by others. Last and not least it has played dirty in the past.

            Now it can't even ship it's own browser on its own OS as does Apple nor can it offer much in the way in cool free aps as does Apple.
            deowll
          • Do I really need to give you a history of ...

            ...M$ anti-trust violations going back to the 90s?

            Maybe you should consider their "hate" by some to be [b]deserved[/b]
            Wintel BSOD
          • Rightttt....

            And I have a bridge to sell you. We just painted it bright green and changed the polka dots from pink to bright yellow...

            :D
            Wintel BSOD
    • Scene 2009

      ROSE

      "Mr. Andrews, I did the sum in my head, and with the number of
      lifeboats times the capacity you mentioned... forgive me, but it seems
      that there are not enough for everyone aboard."

      Scene 2010
      CUT TO: THE DESOLATE WASTES OF A DIMINISHED MARKET

      ROSE

      "I won't let go. I promise."








      ................................................................................................................



















      bing - The third name of a search engine run by Microsoft, named as a
      tribute to its main competitor: Google. Acronym that stands for: Because
      It's Not Google...
      Graham Ellison
      • Google has nothing to fear

        Bing == Because It's Not Google...? :D

        Lots of money to Yahoo but not a dent in Google's domination, and MS
        will end up wasting a lot of money on nothing.

        I don't mind competition but seriously doubt the two dinosaurs Yahoo
        and MS are capable of delivering what's required: something new,
        innovative and truly useful that Google doesn't have.
        Mikael_z
        • Like relevant links?

          {NT}
          Sleeper Service
        • I actually think it will hurt both of them...

          As of today I will no longer use Yahoo for anything... No searching... No email... Nada... zip...

          And there is no way I will ever use bing because bing is a joke and a half.

          So Google just up'd it's share by Microsoft getting in bed with Yahoo... ewwwwwww.. can you imagine the hideously ugly kids that Balmer and Bartz would make if someone bred the two??? They both look inbred to begin with... They would spawn the new cast for the Goonies part 2.

          So the final score...
          Google +1
          Yahoo -1
          Microsoft - still sucking a goose egg at zero.
          i8thecat
          • You think your queries account for 10% ?

            @i8thecat, so, you used to use Yahoo till this date, but just because there was a deal with Microsoft, you won't use it now. Sad, you can't even convince yourself.

            If you stop quering on Yahoo/Bing and start searching on Google, how much would it make difference :). Thank again :)

            I personally like Bing. It has a lot of different things which google does not have like shopping, travel, healthcare + multimedia search is awesome. I appreciate what is good. It has aa lot to do, but it is not bad. Check out this tool http://blindsearch.fejus.com/, which is basically blind search. You will surely be surprised. May be they can convince you :) Good Luck !
            animageofmine1
          • Don't be such a fool animageofmine1

            You assumption is that I think my queries account for 10%??? Where the heck did you pull that from.. wait.. don't tell me... forget I asked.

            Yes, I used yahoo up til yesterday. Now because of a deal with Microsponge, I will not use yahoo anymore. I do everything I can to limit my exposure to Microsoft's sleazy business practices. Keeping my traffic count, stats, and marketing information from them is the least I can do.

            And no, Microsoft is not the only company out there that is skeevy, sleazy, and unethical. I don't do business with those other companies either. It's a conscious decision that I choose to make. I know that I am just a drop in the bucket, but all those drops do add up.
            i8thecat
  • RE: It's official: Microsoft-Yahoo ink 10-year search pact; Regulator scrum

    Wow! Finally Microsoft has reached a deal Yahoo for an
    internet search partnership. Will the newly announced
    deal between giants Microsoft and Yahoo be a good
    thing? Got to wait and see. But atleast Microsoft and
    Yahoo deal is straightforward and not complex at all
    and ofcourse, the negotiation talks have been going
    for long. I was just curious to know all the past
    negotiations between Microsoft and Yahoo so collected
    all the articles and links (more than 200) related to
    the current merger and the previous events or
    negotiations between Microsoft and Yahoo. If you are
    interested check the link below.
    http://markthispage.blogspot.com/2009/07/saga-of-
    microsoft-and-yahoo-from-2007.html
    kotla_sr
    • For the most part ...

      Everyone M$ has "gotten into bed with" has usually been on the raw end of it in the end.
      DaemonSlayer
  • So, does Yahoo = Bing, or Bing = Yahoo?

    I will have to google that to learn more.

    ;-)

    Regards,
    Jon
    JonathonDoe
    • Google should . . .

      change it's name to "Doink!" . . .That way we have ALL of the cartoon sounds represented . . . ;)

      JLHenry
    • Like "Trading Places" for Search Engines! ;)

      So will the real Yahoo please step forward!
      ...as we watch Bing take one giant leap to the
      front! haha

      But this is really going to confuse Google
      Search, because both Yahoo and Bing will be the
      same thing. So it's like which cup is the pea
      really under? ;-O ..and even then, which pea is
      the real Yahoo pea? xD

      In the end though, neither partner has an
      engine (technologies or market share) to
      compete on the same level as Google on Ad &
      Database power alone (aside from actually
      finding things)! ;)
      i2fun