Microsoft and Yahoo announced a search deal today as widely speculated, according to the agreement Bing will power Yahoo search results for 10 years, and Yahoo will look after the ad sales. The search deal may be beneficial to the Bing as it brings nearly 20% of search market share in US and a bit less worldwide.
For Web users and advertisers, this deal will accelerate the pace and breadth of innovation by combining both companiesâ€™ complementary strengths and search platforms into a market competitor with the scale to fuel sustained development in search and search advertising.
This may be good for the advertisers, as it offers more inventory from a combined search engine. For users there is not much, those who are using Yahoo search are now forced to use Bing search. Bing generated a lot of buzz when it launched and gained some search share at Yahooâ€™s expense.
Under this agreement, Yahoo! will focus on its core business of providing consumers with great experiences with the worldâ€™s favorite online destinations and Web products.
Yahoo has some good properties apart from search like Yahoo Finance, News, Sports etc. With the revamped Google Finance, Yahoo needs to innovate to stay in that space, Yahoo Finance still rules but from past few years that has not changed much. Yahoo can focus again on Yahoo Finance that will be beneficial to Yahoo users.
â€œThrough 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,â€ said Ballmer.
This agreement with Yahoo may lead to innovation in search but definitely it wonâ€™t provide a consumer choice, in fact with this deal there is a less choice now, Yahoo, once worthy competitor to Google is gone.
Now what will happen to all those Yahoo search project like BOSS, Search Monkey, Search APIs. What about the developers who are using these technologies to build applications?. Will Yahoo continue to support these technologies even after giving up on search. I personally use one of the Yahoo search API to power one of my personal project, so I am curious to know how it will effect us in the near term.
The key terms of the agreement are as follows:
- The term of the agreement is 10 years;
- Microsoft will acquire an exclusive 10 year license to Yahoo!â€™s core search technologies, and Microsoft will have the ability to integrate Yahoo! search technologies into its existing web search platforms;
- Microsoftâ€™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 companiesâ€™ premium search advertisers. Self-serve advertising for both companies will be fulfilled by Microsoftâ€™s AdCenter platform, and prices for all search ads will continue to be set by AdCenterâ€™s automated auction process.
- Each company will maintain its own separate display advertising business and sales force.
- Yahoo! will innovate and â€œownâ€ 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!â€™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!â€™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!â€™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.