After launching a jab at Google via the Office Web announcement, Microsoft today delivered a left hook that it hoped will deliver the solid punch to rock its rival, Google the Cloud King.
Microsoft and Yahoo seal web deal screamed the headline today. Microsoft’s Bing search engine received a shot in the arm with this deal that allows Microsoft to take control of Yahoo’s search engine and search advertising technology.
Funny eh.. Yahoo! who once ruled the search engine world ago is now resigned to be the sales-rep. Yahoo! new CEO, Carol Bartz, thought that this is a great deal. Let someone else deal with the techie stuff headache, we’ll still get to keep 88% of the ad-revenue – plus the deal would “boost Yahoo!’s annual operating income by $500m and secure $200m in savings“. The income is from guaranteed revenues per search for the first 18 months of the 10-year deal + rights on premium adverts. Premium Adverts is trade talk for advert deals that are concluded face-to-face (usually with major accounts) as opposed to those placed online by mere mortals like us and these deals accounts to almost half of Yahoo!’s advert income.
Apparently, it does not matter that Yahoo! doesn’t get a single cent of cash upfront out of giving away its family jewel. Some CEOs sure think ‘out-of-the-box’. Maybe she’s been visiting PKFZ to pick up some tips. Using my Casio calculator, I can’t figure out how (US$500 million + US$200 million) x 10 is better than US$47 billion – that’s before taking into account the fact that the income is only coming in over ten years.
Ask this: What happens in 10 years, when the partnership ends and Microsoft’s Bing engine powers all of Yahoo’s search queries? Maybe the same way when Yahoo! send the out-of-date Geocities to its demise.
On the other hand, Microsoft is obviously delirious that its effort to take control of Yahoo! since late 2007 has finally borne fruit. And it appears to cost Microsoft a lot less than US$47.5 billion that was offered in Jan 2008.
“Through this agreement with Yahoo, we will create more innovation in search, better value for advertisers, and real consumer choice in a market currently dominated by a single company,” said Mr Ballmer. “Microsoft and Yahoo know there’s so much more that search could be. This agreement gives us the scale and resources to create the future of search,”
What does this mean?
- In one stroke, Microsoft will now get to control 30% of the US advert market. (We wonder how will this translated into iron-clad features of the to-be released Windows 7) and Microsoft finally gets to be a genuine contender in the search-ads world
- Yahoo! is now no more a search engine company, but is an advertising and media company (like AOL)
The King of Cloud, meanwhile, still controls over 2/3 of the ad-sales market. Looking down at the Babel Tower being built by the pretenders. As at the time of writing, we haven’t received any reports of shudders from the throne yet.
Ash is not paranoia. It is just that his keen sense of observation makes him see patterns that others fail to see.
As advertisers we like adcenter for the great conversion rates of Bing’s traffic.. With Yahoo though we are forced to buy clicks from junk partners that send nothing but fake clicks.. It’s a daily job to monitor all the new bad-domains to block.. And you have to PAY for all that..
With the current merge of Yahoo and Bing let’s hope the new “team” will do it RIGHT by giving the advertisers the choice to pay only for real yahoo/bing searches.. just like Adwords and adcenter allow (for now?).
Just my 2 cents
Cheers!
Thanks for sharing this information. I’d like it with even more detail though, feel free to e-mail me about it.