Yahoo and Microsoft have announced a long-rumored Internet search deal that will help the two companies take on their biggest rival, Google. Microsoft's Bing search engine will power the Yahoo website and Yahoo will become the advertising sales team for Microsoft's online offering. Yahoo has been struggling to make profits in recent years. Last year it rejected several takeover bids from Microsoft in an attempt brace the Tsunami alone. Yahoo's shares fell 12% after the announcement, while Microsoft shares moved up by less than 1%. Microsoft boss Steve Ballmer said the 10-year deal would provide Microsoft's Bing search engine with the necessary scale to compete.
Through this agreement with Yahoo, they will create more innovation in search, better value for advertisers, and real consumer choice in a market currently dominated by a single company (google). Microsoft and Yahoo know there's so much more that search could be. This agreement gives them the resources to create the future of search engines. In return for conceeding control of its search engine, Yahoo will get to keep 88% of the revenue from all search ad sales on its site for the first five years of the deal. In the last 5 years of the agreement the will have the right to sell ads on some Microsoft sites.
Yahoo's team will have to brace itself for job losses over the next two years. Some staff will transfer to Microsoft; others would stay on with Yahoo. Yahoo said the deal would benefit Yahoo's users and advertisers. This agreement comes with an abundance of value for Yahoo, the users and the industry. It also establishes the foundation for a new era of Internet innovation and development. The deal became possible after Yahoo's co-founder Jerry Yang stepped down as chief executive of the company late last year. Yahoo said the deal would boost annual operating income by $500m and secure $200m in savings. Microsoft offered to buy Yahoo in January 2008 - with an offer worth about $47.5 billion dollars.Yahoo's new CEO, Ms Carol Bartz, finally sealed the deal. The deal ends numerous years of back-and-forth negotiations between the two companies.
By: Frank Bilotta