The Biz of Coding

5 Key Points of Yahoo! - Microsoft Search Deal

by Ujwal Tickoo on July 30th, 2009

News of the Y!-Microsoft Search deal is plastered all over the web and blogs today. The Search Box on www.yahoo.com will be served by Bing. This is the end of Y! Search for all practical purposes.

Some of the key points

1) Covers Web, Image and Video Search. Yusuf Mehdi states:

The deal covers “web, image and video search.” Mehdi explained there will be a single crawl and a single index that both parties will have equal access to — “parity” in his words. He made the additional point that Google never provided full parity to partners and third parties using its index.

2) Y! Sales will do the Search Advertising sales work. According to the official press release:

Microsoft will now power Yahoo! search while Yahoo! will become the exclusive worldwide relationship sales force for both companies’ premium search advertisers.

3) BOSS and Search Monkey code and further development will be taken over by Microsoft:

Mehdi said that Microsoft will be taking them on (”the code and the responsibility”). Beyond this he suggested that Bing would be incorporating the best of Yahoo’s search assets and user experience into its platform and technology, including, for example, Search Monkey.

4) This deal is for 10 years. Display advertising is *not* covered in this deal. According to Carol Bartz

Gives MSFT a 10-year license to Yahoo’s core search technologies. will integrate into AdCenter, which will power both our search and theirs. Display is separate.

MSFT pays 88% TAC on Yahoo’s owned and operated sites for 5 years.

From the official Press site set up by MSFT and YHOO

Microsoft will pay traffic acquisition costs (TAC) to Yahoo! at an initial rate of 88% of search revenue generated on Yahoo!’s O&O sites during the first 5 years of the agreement

5) There will be an Impact of Jobs in Yahoo! Search, some redundancies will come. But ofcourse this all will happen only once Regulatory approval for the deal comes. According to Bartz

Yes, there are certainly many Yahoo search employees who will be asked to take jobs at MSFT. There will also be search employees [who get redeployed]. Unfortunately there will be some redundancies in Yahoo. This is a transition over the next 2 and half years. Nothing will change until we get regulatory approval, but yes, there will be redundancies, but in the future.

Some of my other thoughts:

• Bing as a stand-alone search engine was something that Yahoo! should have done years ago. Loading an entire portal stuffed with ads and images slows down a user looking only for Search. Google home page loads faster than Y! and then Search=Google just is easier for users to remember.
• Not clear what happens to things like Local Search. Mobile for example is not a part of the deal. Same with Maps — which provides a different kind of Search experience. Will Y! *really* invest in all these areas or will they die a slow natural organic death?
• The reduction of competition to just 2 big players will impact innovation in the long term. In the short term with the heat coming from Microsoft, Google may attempt to innovate more. But once market share stabilizes, innovation will slow down.

With Qi Lu the ex-Technology head of Y! Search at Microsoft, this deal of Bing being the Real Search Engine - isnt as weird. Qi was also a huge believer in the India story and I guess in the longer term Search in Microsoft India may become an important focus area. Y! should have taken the 44 billion offer from Microsoft last year. Now there is just a down-slide.

Typically in such large semi-acquisition/merger situations all the action is in the US first. The ripple effects in India and other countries come later. Earlier, Y! employees didnt want to shift over to Microsoft due to cultural differences between the two companies. Do you think employees of Y! will shift over?

Tags: Google, Microsoft, Yahoo

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