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Microsoft inks 10-year Yahoo deal to compete with Google
By Michael Liedtke |
July 30, 2009, Thursday
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Print Edition
Print Edition
MICROSOFT Corp has finally roped Yahoo Inc into an Internet search partnership, capping a convoluted pursuit that dragged on for years and finally setting the stage for an all-out assault on the dominance of Google Inc.
The 10-year deal announced yesterday gives Microsoft access to the Internet's second-largest search engine audience, adding a potentially potent weapon to the software maker's Internet arsenal as it tries to better confront Google, the leader in online search and advertising.
The extended reach will allow Microsoft to introduce its recently upgraded search engine, called Bing, to more people. The Redmond, Washington-based software maker believes Bing is as good, if not better, as Google's search engine. Taking over the search responsibilities on Yahoo's highly trafficked site gives Microsoft a better chance to convert Web surfers who had been using Google through habit.
"Microsoft and Yahoo know there's so much more that search could be," said Microsoft Chief Executive Steve Ballmer. "This agreement gives us the scale and resources to create the future of search."
In return, Yahoo will keep 88 percent of revenue from all search ad sales on its site for the first five years of the deal, and will have the right to sell ads on some Microsoft sites.
Yahoo estimates the deal - which the companies hope to close next year - will boost annual operating profit by US$500 million and save the Sunnyvale, California-based company about US$275 million on capital expenditure a year because it won't have to invest in its own search technology.
Assuming it can pass antitrust scrutiny, the alliance could give Yahoo a chance to recoup some of the money squandered in May last year, when it turned down a chance to sell the entire company to Microsoft for US$47.5 billion. Its current value is about US$24 billion.
The two rivals began talking about an alliance in 2005. Microsoft intensified the courtship with last year's attempt to buy Yahoo.
It took Yahoo's current Chief Executive Carol Bartz just six months to strike a deal - something her predecessors, Terry Semel and Yahoo co-founder Jerry Yang, didn't seem interested in.
Shortly after her arrival, Bartz made it clear she was willing to farm out Yahoo's search engine for "boatloads of money."
"This agreement comes with boatloads of value for Yahoo, our users and the industry, and I believe it establishes the foundation for a new era of Internet innovation and development," Bartz said.
Yahoo will have limited access to the data on users' searches - which yield insights that can be used to pick out ads more likely to pique a person's interest.
Microsoft invested billions in its search technology during the past decade, yet remained a distant third in market share. It is counting on Bing to turn things around.
But even with Yahoo's help, Microsoft still has its work cut out. Combined, Microsoft and Yahoo have a 28-percent share of the Internet search market in the United States, well behind Google's 65 percent.
Google is even more dominant in the rest of the world, with a global share of 67 percent compared with a combined figure of just 11 percent for Microsoft and Yahoo.
The 10-year deal announced yesterday gives Microsoft access to the Internet's second-largest search engine audience, adding a potentially potent weapon to the software maker's Internet arsenal as it tries to better confront Google, the leader in online search and advertising.
The extended reach will allow Microsoft to introduce its recently upgraded search engine, called Bing, to more people. The Redmond, Washington-based software maker believes Bing is as good, if not better, as Google's search engine. Taking over the search responsibilities on Yahoo's highly trafficked site gives Microsoft a better chance to convert Web surfers who had been using Google through habit.
"Microsoft and Yahoo know there's so much more that search could be," said Microsoft Chief Executive Steve Ballmer. "This agreement gives us the scale and resources to create the future of search."
In return, Yahoo will keep 88 percent of revenue from all search ad sales on its site for the first five years of the deal, and will have the right to sell ads on some Microsoft sites.
Yahoo estimates the deal - which the companies hope to close next year - will boost annual operating profit by US$500 million and save the Sunnyvale, California-based company about US$275 million on capital expenditure a year because it won't have to invest in its own search technology.
Assuming it can pass antitrust scrutiny, the alliance could give Yahoo a chance to recoup some of the money squandered in May last year, when it turned down a chance to sell the entire company to Microsoft for US$47.5 billion. Its current value is about US$24 billion.
The two rivals began talking about an alliance in 2005. Microsoft intensified the courtship with last year's attempt to buy Yahoo.
It took Yahoo's current Chief Executive Carol Bartz just six months to strike a deal - something her predecessors, Terry Semel and Yahoo co-founder Jerry Yang, didn't seem interested in.
Shortly after her arrival, Bartz made it clear she was willing to farm out Yahoo's search engine for "boatloads of money."
"This agreement comes with boatloads of value for Yahoo, our users and the industry, and I believe it establishes the foundation for a new era of Internet innovation and development," Bartz said.
Yahoo will have limited access to the data on users' searches - which yield insights that can be used to pick out ads more likely to pique a person's interest.
Microsoft invested billions in its search technology during the past decade, yet remained a distant third in market share. It is counting on Bing to turn things around.
But even with Yahoo's help, Microsoft still has its work cut out. Combined, Microsoft and Yahoo have a 28-percent share of the Internet search market in the United States, well behind Google's 65 percent.
Google is even more dominant in the rest of the world, with a global share of 67 percent compared with a combined figure of just 11 percent for Microsoft and Yahoo.
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