July 30, 2009

Microsoft - Yahoo Search Engine Deal

Microsoft and Yahoo are playing the game of cat and mouse from a long time. But no results were coming out.

Today the D-Day finally came. They came out as two separate company and joining forces together to fight against Google.

The story which is creating headline of many newspaper is the "Search Engine Deal".

Microsoft and Yahoo! have confirmed an agreement for Yahoo! to use Microsoft's Bing search engine across its sites. The ten-year deal will make Bing the exclusive search platform for Yahoo! sites, and give Microsoft an exclusive licence to Yahoo's own search technology. Yahoo! will take over worldwide sales for both companies' search advertising, boosting their position versus market leader Google. Yahoo! expects the deal to add USD 500 million to annual operating profit and save it USD 200 million in capital spending within two years of full implementation. Microsoft will compensate Yahoo! through a revenue-sharing agreement on traffic generated on Yahoo!'s network of sites, and pay traffic acquisition costs to Yahoo! at an initial rate of 88 percent of search revenue generated on Yahoo!'s sites during the first five years of the deal. Microsoft has also agreed to maintain Yahoo's current revenue per search in each country for 18 months after implementation of the new platform. Pending reguatory approval, the companies expect the deal to close in early 2010.

By the help of this deal, both, yahoo and microsoft will get benefit. They will be sharing the profit among themselves and can strenthen their position in the search engine market.

Currently, Bing's market share is around 9% but after this deal the share will be around 26%. Isn't it the bigger pie in this web search market???

Search engine giant Google Inc said it was "interested" in Microsoft's 10-year search deal with Yahoo announced on Wednesday, adding that competition was usually good for online users.

"There has traditionally been a lot of competition online, and our experience is that competition brings about great things for users," said Google spokesman Adam Kovakovich.

"We're interested to learn more about the deal," he said in an emailed statement.

Google made a search ad deal with Yahoo in June 2008 but scrapped it because of objections from the Justice Department. Google is taking wise and calculated risk in getting along this competitive market. They are closely watching the move of Microsoft and Yahoo.

Advertisers had hotly opposed it, fearing Google and Yahoo's dominance of the market could mean higher prices. Yahoo initially struck the deal with Google as a way to fend off an unsolicited takeover bid from Microsoft.

But now the scenario is changed. Yahoo has played a key role in changing the domain knowledge of search and using it as a tool to fight against the Google by joining hands with microsoft.

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