Assuming the FCC doesn’t spoil the fun, it looks like the second time is a charm for a search agreement between Yahoo and Microsoft. At a high level, Yahoo will use Microsoft’s Bing search platform to power searches across Yahoo properties and Yahoo will be responsible for selling and servicing search for premium advertisers. Specific highlights of the deal are:
• 10 year partnership, expected to close in 2010; Microsoft’s Bing to replace Yahoo! search (organic)
• MSN to serve paid ads through adCenter; Yahoo ads will be powered by Microsoft AdCenter – likely won’t happen until about a year after the deal closes, full integration over 24 months
• Premium service sales will be led by the Yahoo search account team. Self Service via AdCenter
• There will be no upfront investment from MSN
• For 5 years:
- MSN giving Yahoo 88% of the search ad sales made
- MSN takes 12% rev from Yahoo
• Projected $275MM in savings for Yahoo
• Yahoo expects to boost its annual operating profit by about $500 million by 2012, when the two companies expect to have everything in place
Based on the terms of the deal it will finally allow each respective group to focus on their strong suits. Yahoo will be able to focus on the sales end of things, something that Microsoft has been challenged with on the search front. Conversely, Microsoft will be able to turn their technological savvy loose to an audience that is large enough to matter.
Will this relationship threaten Google’s dominance in search? Most definitely not!
No direct search competitor will unseat Google in that department because, regardless of Bing’s bells and whistles, it’s difficult to improve the search experience enough for the everyday search user to make the switch.
From an advertiser perspective, the merger creates an audience, that in both size and composition, will be difficult to ignore. While the deal won’t go down until 2010 and the actual switch won’t happen for some period after that, sharp advertisers will certainly be paying a lot more attention to their Bing campaigns in the coming months, to make sure they are dialed in on the nuances of that platform.
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