Well its finally a done deal.
After turning down $44 Billion from Microsoft last year for their company and after reportedly turning down Billions from Microsoft for just its search business, Yahoo finally made a deal with Microsoft for control of its search business.
The final price:
Zero.
Not a dime upfront, nor a dime guaranteed.
Certainly not the “boatloads of money” CEO Carol Bartz said back in May, it would take to do a deal with Microsoft.
The deal is pretty much the same as we reported the other day.
Bing.com will power Yahoo search.
Each company will maintain its own separate advertising business and sales force.
Microsoft will pay Yahoo through a revenue sharing agreement on traffic generated through its network of owned and affiliated sites an initial rate of 88% of search revenue generated for the first five years of the agreement.
The deal would not close until next year and Yahoo says full implementation will take approximately 24 months after regulatory approval.
Yahoo estimated the deal will boost its annual operating profit by $500 million by saving them about $275 million a year.
Microsoft and Yahoo are likely to draw federal antitrust scrutiny into whether the combination would have an adverse effect on competition in the online ad market and will need to get past this hurdle before the deal is cleared.
The U.S. Justice Department spent five months dissecting a proposed search advertising partnership between Google and Yahoo before concluding that it would give Google too much control over the market.
Yahoo shares are down over 8% in early market trading, shares of Microsoft shares are up little over 1%, and shares of Google are down over 1%.
What the deal means to domainers is far from settled.
We have many of our domain names parked with various Yahoo parking partners.
What this will mean to our bottom line is just a guess at this point but my guess it will be good for domainers.
Yahoo is going to receive a 88% revenue share from Microsoft, so the share the parking providers receive from Yahoo will decline by 12% off the bat, however that decline will be made up in in more clicks through Bing.com’s technology, which seems to already be generating more clicks than even Google, and it should force Google to increase its payouts as and become competitive for the traffic they are now taking for granted.
In any event this deal is certainly much better for domainers than the alternatives, which was Google buying Yahoo or Yahoo going away.
We will reach out over the next few days to some of Yahoo downstream providers to get their thoughts on this deal.
This is a great deal for microsoft, they get to eliminate competition, grow their brand and sample yahoo as a search channel with minimal financial risk, moving forward it is hard to see how yahoo grows their biz and creates shareholder value
I can’t imagine this helping revenue to parked domains. If CTR goes up and Traffic Volume goes up from the combined MSFT YHOO partnership CPC is going to go down at the same relative rate. Their might be some very short term up side for domainers but it will shake out very quickly there after.
Ed
Who knows what the effect of this will be.
I do think without meaningful competition Google can continue to squeeze the margins and payout a lower percentage for the same traffic.
If there is competition for the traffic there is the chance that someone will pay more for it.
This is just a guess for all concerned and we will have to see how it plays out
UPDATE
Shares of Yahoo closed down over 12% today,
MHB~ the competition just went from 3 to 2.
Yahoo definitely has been the winner in this deal. They get to concentrate on what they were really successful at in the first place which is a place where people go to get information PLUS they still keep the search revenues without having to invest in R&D. The problem is that people look at Yahoo and see search, but actually search has been a late offering in Yahoo and their primary strength.
Ed
But there was 3 and our money was going down consistently.
The problem was there wasn’t any “real”competition.
MSFT was always under 10% and Yahoo was seen as having an inferior product and its been on the ropes over the last couple of years.
Now you will have a competitor with deep pockets with a good product and their will hopefully be a competition for traffic which will result in higher payouts
I’m not sure when Microsoft’s algorithm will start being used across the Yahoo platform (e.g on Yahoo.com), but I have noticed recently that many parked domains already do not appear in Bing search results. Not good.
For example: if one searches for “alltherules.com” on either Yahoo or Google, one will find — appropriately — the website alltherules.com listed as the #1 result. However, using Bing, the results for “alltherules.com” turns up nothing at all. It’s blacklisted.
For the record, I used alltherules.com as an example because it happens to be owned and parked with NameMedia – a major Yahoo feed provider. I have found these same result for numerous parked domains — including many of my own.
Well, Yahoo didn’t want to be acquired. This partnership will keep Yahoo independent for now. Who knows, they can develop new technologies and become a better, more profitable company and not rely on the web services.
UPDATE
Interview with the CEo’s of Microsoft and Yahoo on this deal:
ttp://brainstormtech.blogs.fortune.cnn.com/2009/07/30/interview-with-bartz-and-ballmer-on-the-yahoomicrosoft-search-pact/
Here’s Balmer’s own words:
“The more queries you see, the more you can tune your product,” he said. “The more scale you have, the more relevant you make ads for users.” Economically, Ballmer said the partnership “creates an immediate possibility for synergy.” Because there will be more bidders in the marketplace, bid prices should be higher, he said, and Microsoft should be able to better monetize its search business.
END
Notice he didn’t mention how important relevant search results are or how much money or how many engineers they will commit to making Bing a better search engine.
Yahoo is hiring salespeople instead of engineers now. They better be good salespeople because they will be selling a piece of crap product and EVERYONE will know that… Yahoo salespeople, advertisers and search engine users.
Ballmer is whoring out Bing and Yahoo trying to get Google level revenue.
IT AIN’T GONNA HAPPEN.
People aren’t visiting to Bing to find advertisers. Balmer just wants their money. He doesn’t want their respect. Same with Microsoft products. He just wants the money. He doesn’t care if Microsoft products suck so long as people are basically forced to use them. Now that he has Yahoo, people are “forced” to use Bing. That’s pure Balmer and that’s BAD for Yahoo.
This partnership is just one more step down the ladder for Yahoo.
Yahoo/Bing partnership is about as interesting as a GM/Chrysler partnership.
The resulting product will still suck.
This is a major advancement in searching on the internet…
This is end of Yahoo. It will slowly bleed to death.
Let’s see. Who will be the winner, Yahoo+Microsoft or Google inc.
Google now has become very popular in almost every country in the world.
moving forward it is hard to see how yahoo grows their biz and creates shareholder value