Aug 3rd, 2009
MSN to Power Yahoo Search…Seriously
Bada-Bing-a-hoo. As crazy as this sounds it is true. MSN or as we now should refer to it as Bing.com has signed a 10-year deal with Yahoo to power its searches for an initial 88% share of search revenue. What does this mean to you? Well if you have ever ranked high with MSN search in the past then get ready to get about 4 times more natural search traffic from this partnership. I have always optimized SEO around Google and have never really gotten much love from Yahoo and have stumbled on great placements on MSN over the years with no real math behind the results.
In a lengthy interview on Friday before departing for a vacation, Carol Bartz, CEO of Yahoo, said she sold the search business because Yahoo could no longer continue to match the level of investment Google and Microsoft were making in searching, one of the Web’s most lucrative and technologically complex businesses.
“My first reaction when I got here was that I wouldn’t even do a search deal,” she said, “until I looked at our expense structure and our actual options and looked at what our prime job was, which is to grow audience.” Yahoo will lose some of its most talented engineers to Microsoft and as many as 400 employees through layoffs. The deal also undercuts years of investment around search technology.
Microsoft will now power Yahoo! search while Yahoo! will become the exclusive worldwide relationship sales force for both companies premium search advertisers. Read the below bullet points from the press release. It is a bit lengthy but good information:
- 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.
This announcement could be one of the biggest game changers in the brief history of Internet as we like to call it.
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