The Yahoo – Microsoft Search Deal, Yahoo Loses Another Battle| And War! And Everything Else!

So the Yahoo/MS search deal is done and here are some finer points (read the entire press release)

  • 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.
  • 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.
  • 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.

Yahoo Loses Another Battle

Lets look at history – Yahoo outsourced search to Google, with a notion that search isn’t a ‘profitable’ game to stay on.
Google changed the world and Yahoo, later (too late?) realized the hidden goldmine in the search business. And then the catch-up game began (and is still continuing).

Lack of gutsy steps added to the chaos and Yahoo kept losing market share.

Lately, Yahoo’s big bet on search was BOSS (and some minor feature improvements on image search and otherwise) and now that MS-Yahoo deal goes through, BOSS’s future is surely questionable?

If Yahoo can’t rely on it’s own tech, why would other developers? Is Yahoo Credible Enough?

To me, this will go down as one of the worst thing Yahoo! ever did (can’t get worst than this)

To me, it’s another war which Yahoo has lost – surprisingly some companies do not learn from the past. They just repeat the same mistakes.

It’s only time when Bing will overpower Yahoo (they just bought some time) and yahoo sales team will realize that they are competing with Google as well as Bing and would be at a loss to convince ‘do business with us, we are better’.

Note to Yahoo Search Team

Some of you are smart enough to move out and do something better. It can’t get worst than this (did you realize that Yahoo doesn’t trust it’s own technology?). Time to do something better. High Time!

Note to Managers – Get more bureaucratic. Throw some more BS. Move to another team and throw more BS. Bleed purple.

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