Monthly Archives: July 2009

Yahoo and Microsoft join forces…finally

After months of negotiations and failed agreements, it appears that there is finally a deal happening between Yahoo! and Microsoft. In the end it appears that Yahoo’s search will die. Current details are listed below, with more details to be released later today in a conference call.

Searchengineland.com reports the following details on the deal:

  • 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 [Note from Danny Sullivan: Exclusive suggests Yahoo itself won’t be able to use the technology or develop it, which means after 10 years, what’s left probably isn’t that useful]
  • 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. [Note from Danny: AOL used similar words about how it would somehow make Google-powered search “better” despite not owning the technology. People still went to Google].
  • 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.
    • 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.
    • 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. [Note from Danny: What’s the amount? And this is far shorter than I’d have expected].
  • 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.

This brings back some memories of my first time on “the net” in my “tech arts” class in the spring of 1995. David Mease, Ryan Vaughn and I had access to the school’s brand new Apple PowerPC. It was the only computer in the school with internet access. Ryan had somehow heard of yahoo.com stating “some kids from MIT built a directory of internet pages”, so we used that as our launch pad and slowly explored the ‘net with our cutting edge 14.4 modem.

Yahoo isn’t going away, but some of its magic and individuality will be mere memories.