For Yahoo, the deal with Microsoft is the single most important part of the big picture business plan. With Microsoft now running the back-end of Yahoo’s search, not to mention the search advertisements, the alliance is a major opportunity for Yahoo to decrease the cost of operations. Meanwhile, because Yahoo is reimbursing Microsoft for transition costs and forking over 12 percent of the search ad revenue, the deal is also costly.
One of the most clear things is that the search alliance will become less costly once it’s complete. At that point, Yahoo will be able to drop its back-end support in countries where Microsoft hasn’t yet taken the reigns, and transition costs will no longer be deducted from the total company income. So it’s good news for Yahoo that the transition to Microsoft has completed in another six regions.
Those six regions are Argentina, Chile, Colombia, New Zealand, Peru, and Venezuela. Several more regions in both Europe and Asia are slated for a transition to Microsoft, while Yahoo Japan sticks out as an exception; they will be transitioning back-end and ad services to Google. Every area where Yahoo transitions these key search elements will have functionality and interface options customized to the unique needs of the region.
In its second quarter earnings report, Yahoo discussed the importance of these transitions, noting a large chunk of their cost of operations that could be blamed directly on transition reimbursements and other fees that would soon dissipate. The company predicted that the remaining regions will be fully migrated by the end of 2011.
[Sources include: The Yahoo Blog]