Microsoft and Yahoo finally close the deal
Microsoft and Yahoo have signed a ten year deal to collaborate on both their search engines and the associated advertising. But the long-awaited deal may attract the attention of regulators on both sides of the Atlantic.
The key points of the deal are:
- Microsoft’s Bing will now power all searches on Yahoo sites.
- Yahoo will sell premium search-related advertising for both Microsoft and Yahoo search results.
- Microsoft’s Ad Center will handle the other sponsored links which appear alongside results.
- Each side will largely retain control over the display (banner) advertising on their sites. However, Yahoo will be allowed to sell some of the slots on Microsoft pages.
- Microsoft will not pay Yahoo any cash up front. Instead Yahoo will get a proportion of search revenue from its own pages; that proportion has been fixed at 88 percent for the first five years of the deal. While that’s clearly less than the 100 percent it gets now, the firm is gambling that the partnership boosts revenue enough to outweigh this.
While the firm is touting the idea that it will wind up $275 million a year better off (thanks to increased search revenue and cost savings), it’s not exactly Yahoo’s proudest day. While stockholders look back at a missed opportunity when Microsoft offered almost $45 billion to buy the firm outright early last year (Yahoo is now valued at less than half that amount), employees will be preparing themselves for job cuts as many roles become duplicated.
Once the deal takes effect, it should take three-to-six months to take care of the technical side of the deal. However, that work can’t officially begin until regulators have concluded any investigations. Given that the number two and three companies in the search market are effectively merging their operations, it seems inevitable that the Department of Justice will put the deal under close scrutiny, as may the European Commission.
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