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Roundup: Microsoft-Yahoo Search Deal

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Well the big news of the day has been the big Microsoft-Yahoo Search deal that was announced this morning.  All the search marketing blogs, tech blogs, news sites, and everyone else has been talking about it.  With the avalanche of deal information and opinion out there, we thought we’d wade through the content and post some links to the stories and posts we found to be the most interesting.

Before we get to the round-up list, let’s quickly go over the basics of the deal.

  • The term of the agreement is 10 years.
  • Microsoft will acquire an exclusive 10 year license to Yahoo!’s core search technologies, and Microsoft will have the ability to integrate Yahoo! search technologies into its existing Web search platforms;
  • Microsoft’s Bing will be the exclusive algorithmic search and paid search platform for Yahoo! sites. Yahoo! will continue to use its technology and data in other areas of its business such as enhancing display advertising technology;
  • Yahoo! will become the exclusive worldwide relationship sales force for both companies’ premium search advertisers. Self-serve advertising for both companies will be fulfilled by Microsoft’s AdCenter platform, and prices for all search ads will continue to be set by AdCenter’s automated auction process;
  • Each company will maintain its own separate display advertising business and sales force;
  • Yahoo! will innovate and “own” the user experience on Yahoo! properties, including the user experience for search, even though it will be powered by Microsoft technology;
  • Microsoft will compensate Yahoo! through a revenue sharing agreement on traffic generated on Yahoo!’s network of both owned and operated (O&O) and affiliate sites;
  • Microsoft will pay traffic acquisition costs (TAC) to Yahoo! at an initial rate of 88 percent of search revenue generated on Yahoo!’s O&O sites during the first five years of the agreement; and
    • Yahoo! will continue to syndicate its existing search affiliate partnerships
    • Microsoft will guarantee Yahoo!’s O&O revenue per search (RPS) in each country for the first 18 months following initial implementation in that country;
  • At full implementation (expected to occur within 24 months following regulatory approval), Yahoo! estimates, based on current levels of revenue and current operating expenses, that this agreement will provide a benefit to annual GAAP operating income of approximately $500 million and capital expenditure savings of approximately $200 million. Yahoo! also estimates that this agreement will provide a benefit to annual operating cash flow of approximately $275 million; and
  • The agreement protects consumer privacy by limiting the data shared between the companies to the minimum necessary to operate and improve the combined search platform, and restricts the use of search data shared between the companies. The agreement maintains the industry-leading privacy practices that each company follows today.

It is important to note, that the integration of Bing and Yahoo core search could take up to 24 months to complete.  So this isn’t going to turn your SEO campaign on it’s head overnight, but it is important to keep tabs on the merger over the coming months and begin to develop a strategy to address the new, more important Bing search.

Microsoft-Yahoo Search Deal News Roundup

Microsoft press release: Microsoft, Yahoo! Change Search Landscape

Yahoo! blog post: What our Microsoft deal means to you

Henry Blodget gives his first take on the Microsoft-Yahoo deal over at businessinsider.com

Rand Fishkin published a great post at SEOmoz about the Top 10 Things the Microsoft/Yahoo! Deal Changes for SEO

From TechCrunch:

Yahoo Search Powered By Microsoft Bing: What SEMs Need To Know from Search Engine Roundtable

It’s Finally Official, Microsoft & Yahoo Make A Deal, Yahoo Gives Up On Search from Search Engine Land

From Marketing Pilgrim:

Feel free to add links to other interesting opinions about the deal in the comments section.

Apple: America’s Most Admired Company

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Apple took the top spot in Fortune Magazine’s “America’s Most Admired Companies” ranking for 2008. Google came in at number four and Microsoft made it into the Top 20 at number sixteen.

The Industry Champions list is worth looking at as well. Anheuser-Busch is not only the King of Beers but the King of Beverages. Altria Group is the champion of the tobacco industry. I guess thats a good thing… Two companies with a large presence in Florida made the Industry Champions list. Publix Super Markets took the top spot in the “food and drug stores” category, and FPL Group (Florida Power and Light) took the honors in the “electric and gas utilities” category.

Komodo Links: It’s all about Microsoft and Yahoo

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It’s the end of the week so that means it’s time for Komodo Links. Yes I’m still in the office on a Friday night. We’re heading out for the IFA annual convention tomorrow so we’ve been tying up all the loose ends today. This week’s Komodo Links has a laser focus. It’s all about Microsoft and Yahoo.

Have a great weekend everybody.

Yahoo is Feeling the Pressure from Microsoft’s Bid

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Yahoo! is feeling cornered after Microsoft made its takeover bid last week. The Yahoo! board said it would take its time to review the Microsoft bid. They haven’t acted on the bid yet.

The New York Times posted an article reviewing the current situation with some great commentary from Wall Street analysts. The article also explores some other options open to Yahoo! if they decide to decline the Microsoft bid, including an advertising partnership with Google, courting other buyers, or forcing a leveraged buyout to take the company private.

Some highlights from the article:

But if Yahoo spurns Microsoft, analysts believe it probably will have to swallow its pride and forge an advertising partnership with Google if the alliance could win antitrust clearance.

Under this scenario, Yahoo would rely on Google to run its search engine while joining thousands of other Web sites that depend on the Internet search leader for a steady stream of ad revenue generated from text-based links that produce commissions with every click.

But getting Google’s advertising help probably wouldn’t be enough to trump Microsoft’s offer by itself. To placate shareholders, Yahoo probably would have to line up enough money to pay a special dividend or perhaps even take the company private in a leveraged buyout.

The list of so-called ”white knights” willing to come to Yahoo’s rescue appears to be dwindling. Several of the most logical candidates, including News Corp., AT&T Inc. and Comcast Corp., reportedly have no interest in trying to top Microsoft’s bid.

Yahoo’s board conceivably could even turn down Microsoft on the grounds that the current offer grossly undervalues the company, given its stock traded as high as high as $34.08 in late October.

If Yahoo assumes that stance, it might provoke a showdown at its annual meeting in a few months. Microsoft has until March 13 to nominate its own slate of directors if it tries to seize control of Yahoo’s board.

What do you think Yahoo should do? Should they take the Microsoft offer, partner with Google, or something else? Let us know.

I personally like the suggestion made by the Merrill Lynch analyst Justin Post, who “believes Yahoo should dangle the prospect of a Google partnership to persuade Microsoft to raise its bid and then accept the higher offer.” Microsoft could call their bluff believing that either Yahoo won’t approach Google or that regulators would deny the partnership on anti-trust grounds. I don’t believe they would call the bluff though. I think Microsoft is just too eager to get this deal done.

Microsoft Proposes Acquisition of Yahoo! for $31 per Share

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The proposed deal, valued at approximately $44.6 billion in cash and stock, would provide a 62% premium to current trading price for Yahoo! stockholders. Microsoft claims the combined entity would be a more competitive company while offering greater value to stockholders and a better choice for customers.

Read the full press release.

Some highlights from the release:

The online advertising market is growing at a very fast pace, from over $40 billion in 2007 to nearly $80 billion by 2010. The resulting benefits of scale along with the associated capital costs for advertising platform providers make this a time of industry consolidation and convergence. Today this market is increasingly dominated by one player. Together, Microsoft and Yahoo! can offer a competitive choice while better fulfilling the needs of customers and partners.

The combination will create a more efficient company with synergies in four areas: scale economics driven by audience critical mass and increased value for advertisers; combined engineering talent to accelerate innovation; operational efficiencies through elimination of redundant cost; and the ability to innovate in emerging user experiences such as video and mobile. Microsoft believes these four areas will generate at least $1 billion in annual synergy for the combined entity.

Microsoft has developed a plan and process that will include the employees of both companies to focus on the integration of the combined business. Microsoft intends to offer significant retention packages to Yahoo! engineers, key leaders and employees across all disciplines.

It will be interesting to see how this plays out.