The whole world is just beginning to learn about the Yahoo-Microsoft deal.
Long after the talks and negotiations of Google taking over Yahoo were silenced, another significant event rose this week on the horizon and the graffiti is MicroHoo. Yahoo as per the deal would sell search ads on its sites and on Microsoft’s Bing, however, it would be powered by Microsoft’s search technology. This alliance has brought together the two biggest international search engine allies and both the companies are quite relieved.
Though, it is difficult to say that Google monopoly would be a totally diluted by this partnership, yet one can see this deal as creating a platform for competition. Together the Yasoft venture would have 30 per cent of search market share with Google trailing almost at 70 percent. The advertising world that was long looking forward to a new competitor to Google has really been buoyed up by this strong partnership of two giants. Here is a picture of Yahoo CEO Carol Bartz making a point during a press conference
Microsoft accounted for 8.4 percent of the search market in the month, with Yahoo clocking in at 20 percent. Google grabbed the lion’s share at 65 percent. To quote Mark May of Needham & Company: “Search advertising is not a zero sum game, in our opinion. If Microsoft is able to make Yahoo! (and Microsoft) search more effective through this deal/combination, then we believe is will result in advertising spending more on the new search platform but not less on the Google platform. A more effective Yahoo!/Microsoft search platform does not mean Google search becomes less effective, and we believe there is more demand than supply for effective search marketing. The dollars will likely come from other, less effective, buckets.”
If Sources close the happenings are to be believed, for the first two years of the deal, Yahoo would retain 110 per cent of all the revenue while in the third would receive 90 per cent. Though nobody’s clear about any clauses on revenue guarantees made by Microsoft, sources held that no upfront payments are involved. However, Microsoft is a winner as it would be getting far more search market share on any one day than what it could if it had relied on organic growth patterns of BING alone. Yahoo on other hand would get a guaranteed pipeline of search revenue for coming 18 months and also get to sell all the search related advertisements on both Microsoft and Yahoo properties. Yahoo CFO Tim Morse estimates a saving of $200 million in capital expenditures and largely a hike of $500 million in operating income. The only regret for Yahoo is that henceforth its search destiny would be controlled by Steve Jobs. Google eyes the whole new development as one that involves messy integration issues that could several months to complete.
