Microsoft and Yahoo Strike a search deal – Yahoo is Officially out of the Game
Yahoo is officially out of the search game, passing the ball to Microsoft. Yahoo has signed an agreement under which Bing will power Yahoo search results.
Boatloads of Cash?
A year ago Microsoft offered over $40 billion dollars for the entire company, which was 60% more the actual value of the company. Yahoo CEO Jerry Yang opposed the deal and literally served as the barrier. A year later Bartz took the high seat as the CEO, and was determined to put Yahoo on it’s feet. She started restructuring the company and generally brought more discipline onboard… – it was a good thing. Meanwhile Microsoft was still poking, this time not at the whole company but at just search aspect of the business. Companies went back and forth, but never reached an agreement. Bartz then said that they are still open to the deal, if Microsoft will give “boatloads of cash upfront”…
In the end? Microsoft got Yahoo to actually pay them for taking over their search business!!! Under the agreement Yahoo will split the money it makes on its properties with search 88% / 12%. Though there will be an increase in revenue, as Microsoft guarantees for 18 month of the 120 month deal, it ranges in millions and does not get to the gold $1 billion mark.
In the end Microsoft got a huge bargain, while Yahoo is left at the mercy of the software giant.
Search is Core to Yahoo’s Business
Though Bartz repositioned Yahoo as the media company, a destination and a portal where people enjoy “high quality web experiences…yata yata yata newspeak…”, Paid search constitutes a large portion of Yahoo’s revenues, and giving it up, means giving up control of the financial destiny to another company.
Lycos and AOL have outsourced search and saw their traffic drop like a rock. Will Yahoo survive? That’s the big question.
Yahoo started as a web directory, when a web was an unorganized place and where there was no high quality search engine. Then came Google and showed the world it is possible to find a needle in haystack, over and over again in a split second. Yahoo realized it needs a search engine and outsourced the search book, for some time to Google. It then realized that search is a cash cow and entered the game…
Now it’s quitting. Will it survive?
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