As expected, the Yahoo-Microsoft search and online advertising deal is now official. In simple terms, the deal is all about Microsoft powering Yahoo search while Yahoo serving as the exclusive worldwide relationship sales force for both companies’ premium search advertisers.
In other words, or in a simpler than the simple terms – Microsoft is actually using Yahoo’s search market share to become the no.2 search engine. Being no. 2 is certainly better than always being on the third spot of the search engine ranking.
From the words of Yahoo’s Carol Bartz:
“This agreement comes with boatloads of value for Yahoo!, our users, and the industry, and I believe it establishes the foundation for a new era of Internet innovation and development. Users will continue to experience search as a vital part of their Yahoo! experiences and will enjoy increased innovation thanks to the scale and resources this deal provides. Advertisers will also benefit from scale and enjoy greater ease of use and efficiencies working with a single platform and sales team for premium advertisers. Finally, this deal will help us increase our investments in priority areas in winning audience properties, display advertising capabilities and mobile experiences.”
And Microsoft’s Steve Ballmer has this to say about the deal:
“Through this agreement with Yahoo!, we will create more innovation in search, better value for advertisers and real consumer choice in a market currently dominated by a single company. Success in search requires both innovation and scale. With our new Bing search platform, we’ve created breakthrough innovation and features. This agreement with Yahoo! will provide the scale we need to deliver even more rapid advances in relevancy and usefulness. Microsoft and Yahoo! know there’s so much more that search could be. This agreement gives us the scale and resources to create the future of search.”
The key points of the Microsoft – Yahoo Search and Online Ad Deal:
- 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.
The agreement does not cover:
- Web properties and products,
- email, instant messaging,
- display advertising,
- or any other aspect of the companies’ businesses.
A new website was also established which will discuss the different aspects of the agreement, probably in the days to come. Check it out at http://www.choicevalueinnovation.com.
So now we wait for Google’s reaction.