Yahoo! & Microsoft Sign Search Deal Prenup

By DOM Team| 4 Min Read | July 30, 2009

Well the world of search is all a flutter with news of the merger between Yahoo! and Microsoft. It’s by no means easy to avoid, but the main crux of the deal as highlighted on ChoiceValueInnovation.com, the website created solely for news about the partnership, is 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.
o Microsoft will pay traffic acquisition costs (TAC) to Yahoo! at an initial rate of 88% of search revenue generated on Yahoo!’s O&O sites during the first 5 years of the agreement.
o 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.
• 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.

It could take up to two years for the deal to be finalized. That could be an eternity in search years.

As a user, it doesn’t bother me one iota. Yes, Bing is quite a nice search engine, but it’s going to take a bit more than that to pull me away from Google. Besides, it’s about results.

As an SEO it’ll make life simpler as there’ll only be two search engines to twiddle for and gather information from. It’s about results and conversions.

But, the only thing most SEO people agree on is the general usefulness of Yahoo! backlinking data. We all use it and wouldn’t be overly happy if it disappeared.

Still, there’s an opportunity for the new search presence to make inroads if it offers better PPC click-through rates than Google. Currently, Bing offers 1.5% as opposed to Google’s 0.97%. With Yahoo! somewhere in the middle on 1.24% you’re looking at a far better advertising proposition with a 30% joint market share. If you then take the idea that good organic results help PPC ads and vice versa, you’re developing quite a compelling online marketing case.

A jazzed up tools suite for Webmasters would be nice. Y’know, get us onside.

But, the longer it takes to get fully up and running, the more time Google has to refine and redefine themselves.

Could be fun. Follow more of the story here.

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