Well the rumor mill can find new ground to breed in. This morning Microsoft and Yahoo held a conference call to announce their having come to an actual, bonafide ten year agreement to do business in the search arena. Bing will become the search engine that Yahoo uses, Yahoo will be the global sales force for BOTH company’s premium advertising solutions, and everyone will live happily ever after.
Because this is such a monumental (momentus? morbid? anti-climatic?) event, I chose to listen in on the conference call. Something I’ve never bothered to do before. An hour long deal no less.
I live-tweeted & blogged the whole thing. [please excuse short and and typos which are a result of the live blogging]
And here I provide you a ripped out consolidation of my tweets. Pretty much in their raw form, though a bit better grouped, though just as much brevity driven.
And to cut to the chase, Danny Sullivan was also live blogging and after all the big brand people (Citibank, AP Wire service and the rest) got to ask their questions, Danny was able to get in the very last question of the call! (see below).
Microsoft Yahoo Conference Call
Just joined the MSFT / Yahoo conference call about 1 hour ago
Listen only mode to start.
Q & A to follow
Right now blurting out the disclaimers about forward looking statements…
Carol Bartz talking. Great day for Yahoo. Game changer. Yahoo sees help to scale the mrkt, allow them to invest in core future. MSFT wl allow Yahoo to innovate (yeah right)
Yahoo is largest online media property. Extremely compelling opp for advertisers. Deal only impacts search. Yahoo wl be the sales force. Ads will go through MSFT Ad Center. Display will still be split. Yahoo search will now say “Powered by Bing”
Yahoo worldwide sales for both company ad solutions. Scale for rapid improvement, put power back in consumer hands.
Ballmer up now.
Great news for all customers. More innovation, better value for advertisers & real consumer choice. Greater transparency to come. Search scale will provide greater momentum for Bing. Advertisers & Publishers will now have a more viable alternative [than Google]
Back to Carol now…
TERMS – MSFT exclusive 10 yr to Yahoo search technology. YHoo exclusive sales for both companies premium ad services but both will continue to display their own premium ads
MSFT will pay 88% of search revenue during first 5 yrs. YHOO rev wl come down but op income to grow 500 mill a ye
Expect to close the deal by early 2010. Start w/ major markets migrate to Bing by 6 months. Full global transition will take up to 24 months
NOW FOR THE Q & A SESSION
Q from Citigroup
Why not a display ad component? How big is RPS gap currently?
Bartz Answer: display side: wanted to keep it simple as possible, straight forward.
Ballmer answer: taking a big bite here. Search is more well known re: automation. Common data set re: search. RPS gap: both companies close, both lag Google. Some of that is scale. No expectation of negative consequences on MSFT P&L.
Next Q: Jeffries & Co. Carol – you moved from deal w/boatload of cash to boatload of value instead. 41 minutes ago. What would RPS rates be for first 18 months? What is the deal years 6 – 10?
Bartz – Yahoo felt important that cash value up front not as important. More important for significant cap rate so they could invest. After 5th yr evaluate – MSFT may go back and do some of the premium sales
Ballmer: Proposition – current revenue mix gets a certain RPS – MSFT guaranteeing that if everything looks the same over time.
Q – Adam Holt – Steve – specific financial targets in the release. can you speak to that?
Ballmer: in the short run – transaction costs. Couple hundreds of millions first couple years. Upside to MSFT improve relevance of search. & as monetization can improve for both through execution that gets upside.
Q Goldman Sachs – Steve – cost side other than couple hundred mil up front, how should we think of cap x?
Ballmer - will be some additional – nothing that impacts FY 10 for MSFT. Op ex perspective some Yahoo engineers may move to MSFT
Q – Ad Age – describe what if any opposition from Washington?
Ballmer – expect some aggressive opposition from “THE” competitor who won’t like more competition – more effective competition.
It’s good for consumer, advertiser & Pub so will present that case in Washington, Brussels
Brad Smith: – look forward to moving forward quickly to present info to Anti-Trust and around the world. Filing starts next week.
Anticipate advertisers will recognize the better value. Pubs wl recognize the additional innovation.33 minutes ago
“THEY” have 78% of the market.
Q from BBC – Do you envisage Yahoo search people move to MSFT or how will handle redundancies?
Bartz: Certainly many Yahoo search employees that will be asked to take jobs at MSFT
Also search employees to help display at global level. And Unfortunately there will be some redundancies.
Reminder though this is a 2 yr transition. First regulatory approval, hopefully early 2010 – and only then there will be transition
BBC follow-up Q – do you have numbers?
Bartz – no numbers to announce at this time. re redundancy
Q from Tomas Koon – how much does this affect the part that search plays in general to your consumers re yahoo mobile?
Ballmer – We’ll ensure engineers on both sides both companies will be able to continue to innovate & treat all users w/ privacy they expect
We’ll work out issues re: how data gets shared, which APIs wl need to be open to give value add to build on shared tech
Bartz: Very careful & systematic re: data information flow re: privacy & so both could innovate & each have unique experience
Follow up Q – With MSFT the lead on search results, how can Yahoo be innovative?
Bartz – it’s how Yahoo can use the search data on their own
Next Q from Paid Content – mobile & other platforms how will those be impacted?
Bartz – wl be able to use the MSFT tech on other platforms. Only diff is that it’s not exclusive
Q – benefits of using MSFT for mobile?
Ballmer – We don’t know what we don’t know all the areas we will invest in.
This gives Yahoo ability to consider that broadly
Bartz – very interested on doubling down on the mobile experience. Frees Yahoo up to invest in other areas of the mobile experience
Q from JP Morgan :
1. What is the Tac rate for when Yahoo does selling on Bing?
2. Carol, what assumptions for the risk re affiliates?
3. Importance of scale for advertisers – what are expectations for getting Google advertisers?
When buying into the ad market, you’re buying into both networks – U don’t know which you will show up on – whereever you show up – that will get the money to that company.
Bartz – worked w/ MSFT on the affiliates. Expect once relationship ends, they will go to MSFT21 minutes ago
Smaller advertisers need to be sure enough meaningful market and dont want to have to learn 3 platforms
By having one system AdCenter (not Panama), expect we can provide much better experience & win them over
Ballmer – total number of advertisers – highlights issue. US combined share much higher than global vs Google
Q – USA Today 1. Separate teams will remain for display?
Bartz – Yes
2. – Steve – explain 10 yr search deal.
Ballmer – engineers know Bing but theres a lot of code, haven’t looked at Yahoo’s code. MSFT has license to Yahoo code & wl need to review to determine how it will be used or not – burden on MSFT to determine. Not just rip & replace.
Bartz – on paid side, Yahoo is already now the provider for MSFT in the International arena. A lot of respect for both technologies.
Q 3 – give for instances re: innovation
Ballmer - UI innovation – MSFT has access to technology from Yahoo. The more paid ad searches you serve, the more you learn about who clicks on what – the more you learn about customers so you can do more
Bartz – innovation on sales & marketing side of it. How we work together with the large CMOs and agencies is also innovation Yahoo is ready for but also you combined that with the UI and back end …
Q – AP – talk about why this particular deal better than last years’
Bartz – Done exploring – there’s more fiction than fact. Big difference – it was more of an up front deal. That not interesting to us. We are trying to run long term business – this is a true partnership – we have controls over Yahoo user interface. Both now have real skin in the game. Yahoo needed to get focused on what our mission is – to be the center of peoples lives on line.
Ballmer – last years deal was not between YHOO & MSFT management – it was more about investors value 11 minutes ago
This deal is not better, it is different. Less up front, more long term. This is good for the shareholders & Yahoos operating business. Economic perspective – its more similar than different.
Q from All Things Digital – Execution & speed details. & what was the final thing to push the deal?
Bartz - both sides will coordinate transition. Not that diff from Overture to Panama transition. Yahoo has experience in that. Team on both sides.
Ballmer – on the sales side, Yahoo leads. Engineering side, MSFT has execution responsibilities & financials.
Both wll have participation.
Bartz – no one thing pushed it through. More trusting there could be a partnership. That took time.
Made more sense over time. the proverbial snowball down the hill.
Ballmer – didn’t come here with a 2 page term sheet. Well over 100 pages.
Follow on Q – did that cause a distraction? Google is one company – this is a partnership. Is that harder?
Bartz – yes. Dating is one thing – partnership is another. Especially on the Yahoo side.
Q = Danny Sullivan – Explain more re: search – Yahoo news, Delicious, Yahoo directory, Paid inclusion?
Bartz – re: Internal yahoo search – vertical – that is innovation Yahoo looking at doing. Other issues like paid inclusion to be decided later. We have full flexibility on what to do inside our sites. Our properties have value
Ballmer – to the degree possible – anxious to see Yahoo take full advantage of the technology. Exactly where that will play off that will be decided over time.
Conference call now over.
Let the spin, rumors & jokes begin!
Alan Bleiweiss has been an Internet professional since 1995. Just a few of his earliest clients included PCH.com, WeightWatchers.com and Starkist.com. Follow him on Twitter @AlanBleiweiss or read his blog at Search Marketing Wisdom.