Search Engine Optimization

As you know Microsoft is the new number two search engine, while Yahoo is out of the game.

Yahoo Benefits and Losses from this deal:

Benefits:

• YAHOO believes deal will generate incremental $250MM in annual cash flow (17% accretive to our ’09 est)
• It is now in a close relationship with the most powerful name is software market.

Losses:

• No up front payment
• It will share 12% of it’s $ 3 billions in search with Microsoft. As mentioned in the previous article, Yahoo will actually pay Microsoft for taking its search engine?…
• Lack of other deals such as display.
• Yahoo is left at the mercy of the software giant, since it has agreed to pass its search and PPC technology. Microsoft is now in control of the $3 billion market cap. Though Yahoo will getting the upper cut of the profits, it is not nearly the same as owing in house search and PPC platform.

The deal is to extend for 5 years, after which companies will negotiate. Even if Yahoo decides to ditch Microsoft, it will be in no position to compete with either Microsoft or Google. Starting from scratch is no longer an option in search (if they are to compete), so Yahoo has made a big mistake, giving up on search, CHEAPLY.

I understand that Yahoo would have hard time defending its market stake against Google, because it does not have the cash big G does. Microsoft would continue stealing Yahoo talent and poking them until they got some kind of deal… its a tough situation and deal was probably inevitable… but if you’re going to give up technology that makes you $3 billion a year, you better get BOATLOAD of CASH for it…

Instead Microsoft got it, literally, for free…

Microsoft Benefits and Loses:

Loses:

• Microsoft is likely to pay for integration of search between two companies, legal costs, etc.

Benefits:

• Microsoft now commands Yahoo’s search engine market share for virtually nothing.
• It is now in a much better position to compete with Google.
• It saved $43 billion dollars.

Balmer got the better side of the deal, and that’s good for him. Frankly, I would not trust Bartz with a company after this deal… I will gladly take my words back if we see Yahoo flourish long term, instead of being swallowed by Microsoft entirely.