Microsoft-Yahoo Deal Struck – Will Be Announced Soon

Multiple sources close to the situation said that the online search and advertising deal between Microsoft (MSFT) and Yahoo (YHOO) has been struck and will be announced within the next 24 hours.

While it is not clear if the actual papers have been inked or approved by the boards of the two companies, sources said it was a formality and that negotiations are complete on a deal that is less sweeping than originally conceived.

In any case, making any partnership is likely to be the cause of much relief at both companies, since they have been trying – without success – to join together to mount a better offense in the sector against the dominant Google (GOOG).

According to sources, as had been previously reported by Advertising Age, there will be no upfront payment to Yahoo, with the focus on a revenue share between the two companies.

Sources said Microsoft search technology will be used on Yahoo sites, although it is not clear if it will be branded as “powered by Bing” – Microsoft’s handsome and innovative new search offering–or not.

In addition, sources said Yahoo would still sell search ads on its sites and on Bing too, although Microsoft’s AdCenter advertising sales technology will be underneath it.

(Panama, we hardly knew ye!)

This makes the deal much smaller than ones previously envisioned, which included Microsoft taking over both Yahoo’s search and its text-based search advertising businesses in exchange for large payments and guaranteed revenue.

Previous discussions also considered Yahoo selling display advertising for Microsoft’s MSN consumer sites.

Doing its own search ads means the cost savings to Yahoo will be less than previously estimated, but it also solves its longstanding issues about control of relationships with advertisers and also of consumer data.

Still, once in place, it is a significant deal in the Internet arena, bringing together two of its most powerful players in an unusual alliance that has been long in coming.

“After three years of trying, it looks like it finally stuck,” joked one person familiar with the situation about the Silicon Valley icon and the Redmond, Wash., software behemoth finally joining together.

And, in fact, Yahoo (YHOO) and Microsoft (MSFT) have been engaged in talks about a variety of partnerships over the years, as well as in a hostile takeover struggle that soured their relationship badly.

But, under new Yahoo CEO Carol Bartz, the companies have re-engaged in recent months, discussing a deal to share search and online advertising technology.

A spokesman for Microsoft declined to comment, as did a spokeswoman for Yahoo (even though BoomTown asked: “Pretty please?”)

The Wall Street Journal just posted a similar story on the deal coming to fruition, as did Advertising Age.

Both posts noted that Yahoo and Microsoft were concerned about regulatory approval, although with Google’s share at close to 70 percent in the search market, it would be hard to argue that their union hinders competition.

Together, Yahoo and Microsoft’s share is about 30 percent.

A search and advertising partnership between Yahoo and Google failed to gain regulatory approval last year–and thank goodness for that!

Yahoo and Microsoft will likely try to paint this one as a counter to Google’s power and hope such an argument will be supported by advertisers, who have long wanted a stronger second-place competitor to Google.

Original post

Comments

[Maxe Paul:]

Sounds like a good time to short Google.

Jul 29 03:09 AM

[Moon Kil Woong:]

Ok, can we say now that Bing is a miserable failure? My biggest worry is that Yahoo will get even worse at pulling up stupid advertising sites every time I search anything rather than the information that I want. Sure Google also steers traffic, but they at least pull up relevant sites along with prefferred vendors.

I can see myself using Alta Vista rather than Yahoo again as a secondary search engine in the near future.

Jul 29 05:03 AM

[battman:]

Absolutely. Used bing for a few weeks. Sucked. limited relevant sites and half the time would give me related videos instead of news without me selecting videos. The site "looked" nice, but didn't work well.


On Jul 29 05:03 AM Moon Kil Woong wrote:

> Ok, can we say now that Bing is a miserable failure? My biggest worry
> is that Yahoo will get even worse at pulling up stupid advertising
> sites every time I search anything rather than the information that
> I want. Sure Google also steers traffic, but they at least pull up
> relevant sites along with prefferred vendors.
>
> I can see myself using Alta Vista rather than Yahoo again as a secondary
> search engine in the near future.

Jul 29 06:55 AM

[holmesnmanny:]

This deal is looking more and more like a disaster for Yahoo. They get nothing useful from this deal. I don't really know where they are getting these figures for potential savings. It's just not gonna happen. You can see the share price retreat due to the fact that numerous people were speculating on a merger. I'm glad I didn't buy into that. I had a funny feeling something like this was gonna happen. Ballmer has got to be licking his chops at this deal. It's a win-win situation for Microsoft.

Jul 29 09:29 AM

[pctvcables:]

I only advertise on Google. I used to advertise on Yahoo but it was painful. Then they "improved" their interface a year of so ago and made it more painful. Please, Yahoo, I want to give you my money. But why can't you just make it as easy and user-friendly as Google has?

Jul 29 10:23 AM

[Zenfar:]

Bing is a huge success, Yahoo saw momentum going away from them, it is possible that Bing helped make this deal happen. It is possible that was part of what Bing was all about.

Jul 29 10:44 AM

[avi8tor:]

Screw Microsoft, screw Google, screw them all!
Use: www.scroogle.org/scrap... and get all the search engine benefits and none of the advertising or spyware (cookies).



On Jul 29 05:03 AM Moon Kil Woong wrote:

> Ok, can we say now that Bing is a miserable failure? My biggest worry
> is that Yahoo will get even worse at pulling up stupid advertising
> sites every time I search anything rather than the information that
> I want. Sure Google also steers traffic, but they at least pull up
> relevant sites along with prefferred vendors.
>
> I can see myself using Alta Vista rather than Yahoo again as a secondary
> search engine in the near future.

Jul 29 01:28 PM

[killBill:]

They'll destroy Yahoo the same way they destroyed all the small software vendors in the past. What happened to their "innovation"? Can't build a search engine? Nothing left to seal?
Redmond bastards...

Jul 31 05:29 PM