Microsoft and Yahoo! have finally officially announced the search deal that has been heavily anticipated for the past few years.
The deal will see Yahoo! becoming the sales team for Microsoft’s online offering, whilst Microsoft will use their search engine to power the Yahoo! website. There are a number of benefits for both organizations involved with the deal; Yahoo! gain financial stability and Microsoft receive the necessary scale needed to compete with Google.
Microsoft’s current CEO Michael Ballmer said that the deal with yahoo “will create more innovation in search, better value for advertisers, and real consumer choice in a market currently dominated by a single company”.
Yahoo! Chief executive Carol Bartz spoke of the deal and stated that the “agreement comes with boatloads of value for Yahoo, our users, and the industry…it establishes the foundation for a new era of internet innovation and development”.
The full official press release can be found here. However a brief outline of the major aspects of the deal can be seen below.
• Microsoft will acquire an exclusive 10 year license to Yahoo!’s core search technologies
• Microsoft’s Bing will be the exclusive algorithmic search and paid search platform for Yahoo! sites
• Yahoo! will become the exclusive worldwide relationship sales force for both companies’ premium search advertisers
• Each company will maintain its own separate display advertising business and sales force.
• 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.
• Microsoft will guarantee Yahoo!’s O&O revenue per search
• Yahoo! estimates that this agreement will provide a benefit to annual operating cash flow of approximately $275 million
