Microsoft and Yahoo Strike a Search Deal

July 30, 2009 · Written by Kris Themstrup

Microsoft Yahoo DealIn the last 48 hours the web has been buzzing with the news of a Microsoft-Yahoo search deal that could potentially change the landscape of search forever. Although not final and more importantly, not approved by the regulatory commission, the deal would essentially make Microsoft’s search technology, Bing, the engine that powers all Yahoo search. There are other stipulations to the deal and a lot of technical specifics, but both companies feel they benefited from the deal and are looking forward to implementing the change as early as the beginning part of 2010. Google, however, might have something to say about the deal, as this essentially removes a search competitor from the market and makes it a two-horse race in the very lucrative game of search.

Here’s the basics of the deal and some links to more information:

The main component of the agreement involves search technology. Both Microsoft and Yahoo currently have their own search technology, or engine, that powers both the organic or natural search results and the paid or sponsored listings. Google of course has these technolgies as well. The deal gives Microsoft exclusive rights to Yahoo’s technology and puts Microsoft’s Bing as the driving engine behind all Yahoo search results. You’ll still be able to search on Yahoo just like before, but all the results will say “Powered by Bing”. Microsoft gets this technology for at least 10 years and is paying Yahoo for it.

Yes, this means Yahoo is giving up on search. Their CEO, Carol Bartz, would like us to think that Yahoo will do better if it can concentrate on its online properties like mail, news, sports, etc. It’s expensive to run search and Yahoo is now going to lease it from Microsoft so they don’t have to. With this deal, they’ll be two main choices in engines. Google, who has about a 70% market share, and Bing, which will power Bing, and all Yahoo search properties, with about a 30% market share. Steve Ballmer, the CEO of Microsoft, is considered a genius for pulling off a deal that eliminates a search competitor at a very low cost.

It may seem like Yahoo didn’t fair very well in the deal, but they get some perks as well. Not having to run and develop search is a big financial gain for one, but Yahoo also got the exclusive right to sell advertising on the network to the premium advertisers (advertisers who spend more money on paid listings than the average advertiser). That means Yahoo has another revenue potential. The paid listing technology will be provide by Microsoft, and those who wish to advertise below a certain amount will complete Microsoft-powered adCenter forms, but Yahoo will be the sales center for the big money.

All in all, there are varied opinions on this deal, especially towards Yahoo’s side. Microsoft is certainly gaining a huge market share and is finally throwing some cash at their engine, Bing (which so far has been doing quite well and is considered a big success). Some have said search was dead-weight to Yahoo, and their content properties (which are the most popular on the web) are more important to their future. But doesn’t this make Yahoo like any other content provider without an engine? Like AOL or Lycos? And we all know how popular they are in comparison (when was the last time you went to Lycos?).

Before we weight the entirety of the deal, however, we must remember that nothing is official… yet. Google will most likely fight the deal, and both Microsoft and Yahoo must still present their case in both DC and Brussels (the regulatory commissions). Right now, it seems likely the deal will be approved, but it’s still a wait and see.

Here’s some additional information on the deal and some of those strong opinions:

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Tags: Industry News,Search News

2 Comments For This Post

  1. John Salamon

    Sounds like Yahoo is out to get shafted!

  2. Kris Themstrup

    To some, it does. Hey John, I checked out your site, nice work! I was wondering one thing though – how come you haven’t optimized the URL structure for your pages? Looks like you have page and post IDs n the URL instead of the titles. Is there a reason for that?

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