Yahoo, Microsoft reach search, ad deal
Microsoft CEO Steve Ballmer uses a giant pen to sign the 10-year deal, alongside Yahoo CEO Carol Bartz, on Wednesday at Yahoo's headquarters in Sunnyvale, Calif.
(Credit: Yahoo/Microsoft )After months of fits and starts, Microsoft and Yahoo on Wednesday announced a 10-year search deal that will see the two companies join forces to take on Google.
"In simple terms, Microsoft will now power Yahoo search while Yahoo will become the exclusive worldwide relationship sales force for both companies' premium search advertisers," the companies said in a joint statement. The deal is expected to go into effect in 2010 and improve Yahoo's profitability, though not its revenue, the companies said.
Less expansive than the all-out, $44 billion acquisition Microsoft proposed last year--and even than some of the search partnerships once discussed--the deal does allow the companies to share resources and combine their engineering efforts. Even together, however, the two companies have only about 30 percent of the search market compared to Google, which has more than twice that amount.
"This agreement gives us the scale and resources to create the future of search," Microsoft CEO Steve Ballmer said in a statement. "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."
Yahoo CEO Carol Bartz, meanwhile, said that the move will help Yahoo focus on other areas, also adding that the deal has the full support of the company's board (lest anyone wonder what Carl Icahn thinks about the more limited deal).
"This is a significant opportunity for us," Bartz said. "Microsoft is an industry innovator in search and it is a great opportunity for us to focus our investments in other areas critical to our future."
Editors' note: The two companies had a conference call Wednesday morning to discuss the deal. Click here for our live-blog coverage of that event.
The dollar value
As for the financial terms, there is not the large upfront payment once discussed. However, Microsoft will offer both revenue guarantees to Yahoo as well as the lion's share of the search-advertising revenue generated on Yahoo's site.
That apparently wasn't enough to satisfy investors. In trading before the market opened, Yahoo's stock dropped more than 7 percent, or $1.28, to $15.94. Microsoft rose 1 percent, or 24 cents, to $23.71.
Yahoo will get 88 percent of search revenue created by its sites during the first five years, while Microsoft will guarantee a certain level of search revenue for 18 months in each country. The companies expect it will take about two years after the deal is approved to fully get the partnership up and running.
Once fully in place, Yahoo said it expects the deal will boost its annual operating income by about $500 million, while reducing capital expenditure by $200 million and increasing operating cash flow by about $275 million per year.
Microsoft will be able to incorporate Yahoo's search technology, including its Panama ad-selling tool, but the companies will use Microsoft's AdCenter sales tool and Bing search engine to power both sites.
Aiming to head off privacy concerns, the two companies noted that "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 deal must still pass regulatory muster and the two companies anticipate it will take several months to finalize. "Microsoft and Yahoo expect the agreement to be closely reviewed by the industry and government regulators, and welcome questions," the companies said. "The companies are hopeful that closing can occur in early 2010."
Microsoft and Yahoo are joining forces in search, but in a line clearly aimed at regulators, the companies take pains to note that their collaboration is limited to that arena.
"The agreement does not cover each company's Web properties and products, e-mail, instant messaging, display advertising, or any other aspect of the companies' businesses," they said. "In those areas, the companies will continue to compete vigorously."
During her years at CNET News, Ina Fried has changed beats several times, changed genders once, and covered both of the Pirates of Silicon Valley. These days, most of her attention is focused on Microsoft. E-mail Ina. 
For all you Google fans this is actually good news. They will be forced to get off their laurels and begin innovating instead of stagnating like they have for the last 5 years. Otherwise the competition is ready to take what they once took for granted, constant increases in market share and record breaking profits month after month.
Otherwise, their combined search marketshare will likely start dropping a bit...
You've never had a clue about anything before now. So why should this post be any different? Bing is actually growing in market share and has been starting to eat away at Google here in the US. Yahoo's relevance in the rest of the world is much better and those two things combined will likely result is some amazing changes in the game. Your better off just not posting until you read a book and get a clue.
Two big companies with great talent may bring some good and new software to the market.
Google is innovative and they are number one in search and ad. But this may make them work even harder, and the same for Microsoft and Yahoo.
Let us hope that this will be good for us costumers. I think that this is beyond search and advertisement.
read this: http://www.marketwatch.com/story/microsoft-and-the-yahoo-patent-portfolio
Then read this: http://marketshare.hitslink.com/search-engine-market-share.aspx?qprid=5&qpdt=1&qpct=4&qptimeframe=M&qpsp=102&qpnp=25
(specifically, look at the long-term search engine share figures (where you see Microsoft-owned properties dropping). )
Combined with the end of the looky-loo bump that Bing got, I'm guessing you're about to eat a big ol' helping of Crow, like you usually do. Anyone with the time and the means can research your post history with what actually happened afterwards... may want to keep that in mind, eh? ;)
When I click on their video links, I get a where's your WMV player error. (I use a Mac). I can't remember the last time I had a problem viewing video of any kind ( wmv, mov, etc.) on any site, until today.
It's not a good sign.
Bing, in my opinion is great and has replaced google as my default search engine. Love the daily photo, search results, in my opinion, are every bit as good as google's (still use both though, just as I did when google was my default), its Travel site has some great tools for searching fares, image search is slicker than googles, previewing videos by hovering your cursor over them, add to that Google's well-documented privacy, or lack thereof, issues. Hate all you want but there's some good stuff here.
During a story which aired earlier today on NPR's Morning Edition "Bing" and "Google" were both used as verbs, as in, "you can just bing it or google it" (Bing was even cited first if I'm not mistaken). Hearing that speaks volumes - Microsoft must be doing something right. Your move Google.
Amen
So much for choice, value, or innovation, huh? :)
(by the by, I think VLC can handle the WMV files, but I haven't seen or used one in so long outside of Windows that I honestly couldn't care if I ever have to actually play one).
As an afterschool special, it's viable. As a business plan? meh.
Powerpoint was also an aquisition. Don't underestimate the potential of this deal
The funny thing about most of the companies you listed is that there is nothing special about the products they make. I guess that goes to show that when you have a monopoly you don't need quality.
The Department of Justice head who lodged the case against Microsoft awhile ago on the matter of IE with Windows was found heavily biased against Microsoft and engaged in unethical/unfair practices to make Microsoft seem bad.
The US cases against Microsoft were all dismissed because the courts found that MS was not in any violation, and it was all a bunch of made up crap.
http://markthispage.blogspot.com/2009/07/saga-of-microsoft-and-yahoo-from-2007.html
LOL.
At the current rate, that would take a couple of centuries...
i am pretty active web and seach user and that would happen atleast once every 3 days or so, its annoying
also i have been extremely annoyed by the recent changes to my yahoo services over the last year or so, especially mail/instant messenger
yahoo has nothing innovative or fresh to contribute they just move crap around and confuse you
google really seems to have thier act together when compared to yahoo and microsoft
i hope yahoo and microsoft realize what they are dealing with and get it together
No matter how many people claim that Bing is wonderful, I find that in many cases it just cannot handle the task of searching well compared to Google.
I also just find myself at Google -- I'm slowly getting rid of my Yahoo account to use GMail, for instance, I like Picassa a lot, etc.
I just admit: all this feels like one sinking freighter (yahoo) is being attached to the dinghy of a yacht known as Microsoft.
I also wonder: as search continues to change (say more and more to smart phones) -- I just anticipate Google being more aggresssive/assertive there. Yahoo as my old home page -- that's pretty dated.
Reality check dude. MS BING is getting an " upgrade " by partnering with Yahoo!'s technology.
It is easy to understand Ballmer's & MS's confusion about innovation when neither of them has had any experience doing it.
At least, that's the definition I think most people working in software use.
Chrome OS , indeed. Yep...I`m running Halo 2 on my Chrome OS
Bwahahahahah !
Compare that with Bing. Microsoft's "decision engine" is just Live Search with a fresh coat of paint and a few tweaks and a deep pocketed backing. Microsoft's intentions with search were as different in 2004 for MSN Search as they are now with Bing from Google's intentions. Microsoft started development of it's own search engine when they, along with almost every other firm and investor realised they were wrong about Google. Microsoft suddenly realised how immensely profitable search was and, being as they were, decided they wanted not just a slice of the cake, but the whole cake and recipe itself. Their sole intention was to earn revenue, so they didn't bother to compete against Google by providing better technology. Instead, their tactic was to push MSN Search onto users by setting it as Internet Explorer's default engine and home page, tying it into the Windows operating system and forcing it onto every platform they had control over. Then, in 2006, they assumed that giving MSN search an appearance makeover and attaching the Windows brand name would work magic. When they realised that all their efforts did nothing to steal users from Google, they decided to try buying Yahoo to get hold of Yahoo's 20-something% of search share and gain control over the millions of users who used Yahoo's services in a bid to topple the field in their favour. The deal didn't come through, and Microsoft decided that it would again paint over Live Search, improve the results a bit, give it a springy name and invest heavily in advertising it. The result - Bing.
When Bing was launched and its hyped up $100 million was put to use, users were curious about the "decision engine" and started testing it for themselves, and this initial spike in usage was taken up by Microsoft and portrayed as a gain on their end and a loss on Google's and Microsoft pundits took up the cry, saying to themselves and anyone who would hear that Bing would kill Google, when in fact Google saw virtually now drop in share because the only share that Bing gained was from it's predecessor and some of Google's lesser competitors. The reason being that users of Google were more than happy with Google and were too used to Google to consider switching to Bing. After all, what does Bing offer to them that Google doesn't? Nothing new. In fact, users seem to be using Bing for the sole purpose of exploiting the Cashback feature. So ultimately, Microsoft's web search engine has turned into a product search engine and is again failing its goal.
With the condition markets are in at present, Yahoo is trying desperately to make some financial gains. Yahoo Search isn't helping them and, after having spurned Microsoft's take over attempt, they are under immense pressure to show profit, lest they lose investors. So when the Bing nugget dropped in front of their face, they jumped at it hoping to make the gains they were desperately trying for. Microsoft saw it as a "golden" opportunity and ran with it. Carol Bartz's smug front was apparently just that - a front for what was an eagerness to gain profits by any method they could.
This deal just gives a chance for one to gain money from the other while both mutually experience losses and Google continues innovating and gaining a loyal following among the Internet's users and an unopposed omnipresence.
Varun Pramanik
But most importantly , you just wasted a lot of time , and no body cares what you think. We can think and try new things on our own. We don`t need your permission.
It may happen if Yahoo turns off their search engine, or MS later totally buys Yahoo out and shuts off the yahoo search engine.
Get some lube and a doughnut, you just need to cool yourself off.
@AppleSuxLeo - Apparently you cared enough to read my comment. Thankfully for it's users, Google doesn't waste time trying on the emperor's new clothes. 60% of the world would scoff at the statement that Google doesn't innovate. Your assertion that Bing has gained "significant market share" is challenged in the following articles:
http://www.informationweek.com/news/internet/search/showArticle.jhtml?articleID=218401530
http://www.businessweek.com/technology/content/jul2009/tc2009072_666843.htm?chan=technology_technology+index+page_top+stories
http://industry.bnet.com/advertising/10003000/jwts-100m-for-microsofts-bing-is-failing/
@Maclover1 - I concur.
@YankeePoodle - Thanks for the suggestion. Let's "Bing & Decide" whether to do it. </sarcasm>
- by inachu1 July 29, 2009 11:00 AM PDT
- I find this disgusting as yahoo search ability was 100 times much better than the search ability of msn/bing search by far.
- Like this Reply to this comment
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Showing 1 of 2 pages (103 Comments)Really sad to see yahoo sink down to bings level.
So sad.
More of a reason to keep using google.