First to pounce on the SEC 8-K filing by Yahoo was PaidContent, which provides an extensive bulleted list of many of the deal terms not revealed last week during the frenzy of conference calls and articles that followed the official announcement of the Microsoft-Yahoo search deal. CNET also writes about selected aspects of the deal contained in the filing, specifically an “escape clause” (termination) for Yahoo (see below). And the AP has a short piece on how the deal terms require Microsoft to hire at least 400 Yahoo employees.

Here are some verbatim excerpts from the SEC filing:

Negotiation and Execution of the Definitive Agreements

Pursuant to the terms of the Letter Agreement, the parties will negotiate and execute the Definitive Agreements as soon as practicable but in any event by October 27, 2009 (the “Negotiation Period”). If the Definitive Agreements are not executed during the Negotiation Period, the parties will submit any disputes regarding the final terms of the Definitive Agreements to an arbitration panel.

Conditions to Commencement and Termination Prior to Commencement

Prior to the Commencement Date, the Letter Agreement and Definitive Agreements may be terminated only by (a) mutual consent, (b) if a breach renders a condition incapable of being satisfied by the Termination Date (as defined below), or (c) if the conditions to commencement have not been satisfied by July 29, 2010 (the “Termination Date”); provided that Yahoo!, in its sole discretion, has the right to extend the Termination Date by six (6) months if the required antitrust approvals have not yet been obtained.

Search and Advertising Services and Sales Agreement

For a period of ten (10) years beginning on the Commencement Date (the “Term”), Microsoft will be Yahoo!’s exclusive technology provider for algorithmic and paid search services and Microsoft will provide contextual advertising to Yahoo! on a non-exclusive basis. Yahoo! will be the exclusive worldwide relationship sales force for Yahoo!’s and Microsoft’s premium search advertisers.

The services provided by Microsoft under the Search Agreement will be provided on all web sites, applications and other online digital properties owned or operated by or on behalf of (a) Yahoo!, Yahoo! subsidiaries and Yahoo! joint venture relationships, as well as on software applications developed or distributed by Yahoo! or Yahoo! subsidiaries that provide access to or enable algorithmic search services or paid search services (“Yahoo! Properties”) and (b) Yahoo! Syndication Partners (as defined below), as well as software applications developed or distributed by Yahoo!’s Syndication Partners that provide access to or enable algorithmic search services or paid search services from Yahoo! (“Syndication Properties”). “Syndication Partner” means a third party with whom Yahoo! has contracted to provide algorithmic search services or paid search services.

Subject to certain specified restrictions, Yahoo! will have full flexibility with respect to the user experience, content and look and feel on all of its web pages, and will also be entitled to use the paid search services and algorithmic search services for non-internet search queries with minimal restriction . . .

Microsoft’s mapping services and mobile search services. Yahoo! may implement each of the mapping services and the mobile search services on a non-exclusive or an exclusive basis. Yahoo! also has the option to work with Microsoft to implement the services on other platforms. If Yahoo! elects to receive services for other platforms, it must receive such services on an exclusive basis.

Revenue Share Payments and Other Payments

During the first five years of the Term, Yahoo! will be entitled to receive 88% of the net revenues generated from Microsoft’s services on Yahoo! Properties (the “Revenue Share Rate”). Yahoo! will also be entitled to receive its share (at the Revenue Share Rate) of the net revenues generated on Syndication Properties after the Syndication Partner’s share of net revenues is deducted. For new Syndication Properties during the Term, and for all Syndication Properties after the first five years of the Term, Yahoo! will receive its share (at the Revenue Share Rate) of the net revenues generated from Microsoft’s services on Syndication Properties after the Syndication Partner’s share of net revenues and certain Microsoft costs are deducted.

On the fifth anniversary of the Commencement Date, Microsoft will have the option to terminate Yahoo!’s sales exclusivity for premium search advertisers. If Microsoft exercises its option, the Revenue Share Rate will increase to 93% for the remainder of the Term, unless Yahoo! exercises its option to retain its sales exclusivity, in which case the Revenue Share Rate would be reduced to 83% for the remainder of the Term. If Microsoft does not exercise such option, the Revenue Share Rate will be 90% for the remainder of the Term.

Microsoft will also pay Yahoo! a payment of $50 million annually during the first three (3) years of the Search Agreement. Yahoo! may use these payments to partially cover transition and implementation costs not otherwise covered under the Search Agreement.

Termination Provisions

Yahoo! may terminate the Search Agreement if the trailing 12-month average of the RPS in the United States (the “U.S. RPS”) of Yahoo! and Microsoft’s combined queries falls below a specified percentage of Google Inc.’s (“Google”) estimated RPS measured on a comparable basis or if the combined Yahoo! and Microsoft query market share in the United States falls below a specified percentage; (d) on the fifth anniversary of the Search Agreement, and any time thereafter, Yahoo! has the right to terminate the Search Agreement if the trailing 12-month average of Yahoo!’s U.S. RPS is less than a specified percentage of Google’s estimated RPS; or (e) subject to exceptions, either party may terminate if a law, regulation or order would have a significant, adverse impact on a primary aspect of such party’s intended benefit of the Search Agreement.

Transition and Implementation Plan

Microsoft will hire not less than 400 Yahoo! employees (the “Transferred Employees”) and will offer the Transferred Employees market competitive compensation packages. In addition, Yahoo! and Microsoft will mutually agree on a retention plan to be paid for by Microsoft to assist in retaining the Transferred Employees and an additional 150 Yahoo! employees to be mutually agreed upon between Microsoft and Yahoo! to assist with providing the transition services.

The deal seems broader than the “web, image and video” search scope we heard before. Yahoo can terminate the deal if certain targets aren’t meet surrounding revenue per search, benchmarked to Google. At the five year mark the parties can change who runs “premium sales.” The rev share percentages change accordingly.

On a related note, there’s an opinion piece in the Wall Street Journal that argues these terms give Redmond a bigger win than Yahoo in Microsoft CEO Steve Ballmer’s “win-win” scenario but that, in the larger scheme of things, Google may have already won the game:

The deal is a clear win for Microsoft and a qualified win for Yahoo. The big question is whether it makes any difference in the only contest that really matters, which is the one with Google. The risk for both Microsoft and Yahoo is that the contest is already over. Second place won’t really matter, especially as the competition shifts to Microsoft’s home turf: operating systems.

Related coverage:

• It’s Finally Official, Microsoft & Yahoo Make A Deal, Yahoo Gives Up On Search
• Live Blogging The MSFT – YHOO Search Press Conference
• Microsoft-Yahoo Deals 2008 & 2009, Side-By-Side
• A Search Eulogy For Yahoo
• Micro-Hoo Details: Q&A With Mehdi & Schneider
• The Microsoft-Yahoo Search Deal, In Simple Terms

The deal is done. Microsoft has swallowed Yahoo search whole and we can all be put out of our long, lingering misery. Yahoo has given up on search and thrown in the towel. But, outside this industry and our incestuous little gossip circle, what does it really mean for average folks? Does it make a difference… really? When all is said and done, will the news amount to a hill of beans?

Well, in the long run, it’s probably a good thing for most of the players involved, including users. My original concern when rumors of Microhoo started to fly was the distraction that the integration of two very different and somewhat challenging cultures would become. I was afraid that the search user experience would get lost in the process. But the revenue share split does away with that concern, which is good for users. Yahoo can continue to be Yahoo, minus the “distraction” of search. Microsoft can get serious about search with a more viable economic engine to justify their investment. Basically, the deal gives Microsoft a whole lot more eyeballs for Bing, and that’s going to be beneficial for everyone.

But there are some other reasons why the search user could benefit from this deal:

A release of talent

There’s a whole bunch of PO’d, disenfranchised search engineers that have just had a frightening but potentially liberating view of the future: freed from the shackles of the rapidly sinking S.S. Yahoo, they might actually have a chance to do something meaningful in search.

I’ve had the opportunity to talk to various members of the Yahoo! search team over the last several years, under Semel, Yang and Bartz. The underlying current was always one of thinly veiled frustration. They deserved better. They were smart and, once upon a time, passionate about search. But for the past several years they were left hanging out there, blowing in the breeze. They yearned to do something meaningful. Now, with the ladder kicked out from underneath them, they have no alternative. Whoever hasn’t already jumped ship will be forced to find new, and hopefully, more rewarding homes.

Pushing the wolves back from the door

At the risk of sounding like a broken record, or, less anachronistically, a skipping MP3 file, search needs a major shot of innovation. The dysfunctional competitive environment that we’ve had for the last few years put all the major players in a position where innovation wasn’t encourage. Specifically:

Google. As the market leader with a major marketshare, almost completely dependent on the search advertising revenue stream, it’s hard to rock that boat too vigorously. Every minor change in the search UI could have a potentially negative impact on ad clickthroughs. The dynamics of the SERP are subtle and small changes can have big impacts on behavior. Given the obsessive focus on quarterly revenue numbers by Wall Street analysts, and the macro economic impact of the recession, this was not the time to boldly screw around with your golden egg-laying goose. Google always speaks a good game when it comes to hyping their efforts to innovate in search, but come on, how different is the Google SERP now from what it was 4 years ago? How innovative have they been with AdWords?

Microsoft. Microsoft was the one who was really in a position to innovate, but despite repeated commitments to search from everyone from Gates on down for the last several years, the company’s track record has been less than stellar, to be exceedingly kind. Bing is the first sign that they’re motivated to get it right, and that’s really more of a catch up move than anything. But at least they’re in the game now. I think the biggest problem was getting alignment in the gargantuan, lumbering Microsoft corporate structure. There was a lot of left hand/right hand lack of communication from Spanky and the gang in Redmond. It’s hard to innovate when you don’t even know who’s working on what.

With Bing, Microsoft showed they can execute. Now, let’s see if they can innovate.

Yahoo. You don’t innovate on the Titanic: you just try to survive. Nuff said.

What the Microsoft-Yahoo deal does is allow Microsoft’s search champions to better sell the need to innovate within the company. They have a bigger market share, can forecast significant revenue potential and make the case for investing in rapidly upping the search experience bar.  Microsoft can afford the fluctuations that are inevitable in ad revenue as they experiment with the UI, because search is a pretty small drop in the revenue bucket. And it’s certainly not that they don’t have the resources—all they need is the corporate prioritization and alignment. This deal may just do that for them.

A bigger ad inventory

Microsoft CEO Steve Ballmer sent the signal of the true value of a Yahoo partnership when he said last December:

“We’re fully prepared to compete without any partnership with Yahoo. We don’t need to act. Would it be advantageous for both of us to make a deal? Look, the fundamental basis for doing the search deal with Yahoo has to do with critical mass in the advertising marketplace. It doesn’t have to do with technology, or any of these other things, it really is a market phenomenon. Together we would have more advertisers… which means we’d have more relevant ads on our page. We’d have higher monetization levels possible in front of us because there would be more people bidding on more key words. Most importantly, Google would have perhaps a real credible competitor sooner.”

Success in search is all about relevancy. And if ads are going to be part of the results set, those ads better be as relevant as possible. The bigger the ad inventory, the more relevant they will be.  It’s a pretty simple equation.

And ad relevance is massively important to the user experience. At Enquiro we’ve done several studies that either directly or indirectly examined the importance of ad relevance to the overall search experience. The results are abundantly clear: the better the ads, the happier the user. The deal gives Microsoft a massive increase in advertiser inventory, and that’s perhaps the most important asset in the deal. It doesn’t matter that Yahoo gets 88% of the revenue. That’s short term thinking.  This is about running all those ads through the Microsoft platform, giving them the ability to control quality, targeting and relevance. The goal is gaining market share, and you need the highest quality ads possible to do that.

A stronger commitment from advertisers

No longer is an ad buy on Microsoft tossing them a bone out of guilt or a gesture of protest against a Google monopoly. With a combined market share pushing 30 points, that’s a serious slice of available eyeballs. Microsoft just became a mandatory buy. That allows them to build stronger relationships with advertisers, getting a more serious commitment in return. If Microsoft can pull the pieces of AdCenter together like they did with Bing, they’ll have a pretty powerful ad management platform. And Microsoft doesn’t suffer from the same passive-aggressive relationship with marketers that still lingers in the halls of the Googleplex. Advertisers look at Google with a mixture of resignation, fear and resentment. More than a few will willing fall into Microsoft’s embrace, now that there’s a justifiable reason to do so.

How does this help the user? Happy advertisers mean happy corporate execs up in Redmond, which means more of an appetite for innovation. Expect Microsoft to be more innovative in offering sponsored search formats. And happy advertisers also means more relevant ads (see my previous point).

More serious competition for Google

This deal sends a signal Google can’t ignore. They’re still in the search driver’s seat, but at least now they can see someone in their rearview mirror. If Microsoft can adopt a passion for innovation and push the envelope, Google will have to respond in kind. The search experience will evolve more rapidly, hopefully kicked out of the revenue obsessed stasis that it’s currently in. Stagnation benefits no one except the analysts and bean counters who insist that quarter over quarter performance is the only metric that matters. We’re way too early in the game to be that cautious and boring.

Will the Microsoft-Yahoo deal break the Google habit? No. In fact, Google will probably net a couple more percentage points out of this in the short term. But this lays the foundation of a more competitive market place, which can’t help but benefit users.

The deal puts Microsoft in the game. Now, let’s see what they do with the opportunity.

Conductor, a search marketing firm, has announced they have raised $10 million in funding from Matrix Partners and FirstMark Capital.

This is more good news from the search industry showing that venture capital companies are still investing in search marketing firms. Yesterday, we reported that Marin software raised $13 million and today, Conductor raised $10 million.

Here are statements from the release:

“We see persistent demand from large organizations to invest in SEO. However, lacking the tools to manage and measure that investment, many large organizations are effectively inactive in natural search and miss out on significant opportunities to grow their businesses,” said Nick Beim, a General Partner with Matrix Partners. “Conductor has demonstrated considerable success in improving the metrics and transparency of natural search.”

“Matrix and FirstMark bring important industry expertise, support and extensive networks that will enable Conductor to continue giving our customers insight into their natural search efforts,” said Seth Besmertnik, CEO of Conductor. “We look forward to continuously adding significant value to our customers by closing the loop for their natural search marketing efforts.”

paidContent.org reports Marin Software, a search marketing company, has raised an additional $13 million venture capital. The primary source of the money came from DAG Ventures, adding up to Marin raising a total of about $25 million in funding from sources such as Benchmark Capital, Amicus Capital and Focus Ventures.

Marin reportedly manages $300 million of online ad spend annually for clients such as ZipRealty and Microsoft’s Razorfish.

It is nice to see companies in the search field still able to raise money in these slow economic times.

Mozilla’s General Counsel, Harvey Anderson, announced the Russian builds of Firefox 3.1 will drop Google for Yandex. He explained that after months of research and surveys, Mozilla learned that their “Russian users really wanted direct access to the Yandex search.” So, in the next build of Firefox, the default search provider will be Yandex for Russian users.

The big loser in all of this might not be Google. PaidContent.org reports that Rambler, one of the big Russian portals, will be letting their CEO go after seeing their market share drop from 14.9 percent last year to just 6.4 percent. The CEO’s departure might be a signal that Google may not follow through on the Begun purchase, where Google would buy Rambler’s contextual ad service for $140 million.

In August of last year, Google renewed their deal with Mozilla to be the default search provider in Firefox. When Google came out with their browser, Chrome, it may have ruffled some feathers.

BusinessWeek and Interbrand have come out with their latest ranking of the value of global brands. The big winners, in terms of positive change in the value of the brand, were Google, Apple and Amazon in that order. The greatest losers included Merrill Lynch, Morgan Stanley, Citi, Ford and Gap.

The methodology for ranking the brands is described below.

Here are the top 10, showing their rankings compared with 2007:

Source: Interbrand (2008)

Here’s how Interbrand evaluates brands:

All brands [are] subject to the following criteria:

–Financial Analysis –Role of Brand Analysis –Brand Strength Score

There are other brand studies and rankings in the market. For example, using a different methodology, Millward Brown named Google the world’s top brand in its annual “Top 100 Most Powerful Brands.”

While Microsoft and Yahoo move further apart from creating Microhoo, they both continue to make changes internally with the intention of building out a better search company.

paidContent.org reports Microsoft is restructuring their Search Business Group. Microsoft is adding a new group focused on commercial search. Leading the commercial search unit is Jeff Kelisky, the CEO of Multimap, who will be the general manager of this unit. That unit will be responsible for Live Search cashback, MSN Shopping, local, consumer mapping, Virtual Earth, and mobile. Jeff’s boss is Brad Goldberg, the GM of the Search Business Group.

paidContent.org also reports that Yahoo is losing another executive. This time it is Todd Teresi, SVP for its Publisher Channel. This comes right before a major launch of Yahoo’s two ad programs, APEX and AMP. Teresi said he is leaving for a “lifestyle” change, but sources told paidContent that he is leaving to take on a top role at some “venture-backed company.” Teresi has been with Yahoo for nine years.

This just in via adAge. Teresi is going to Quantcast, who provides a “new media measurement service that enables advertisers to view audience reports for millions of sites and services to build their brands with confidence.” Teresi will be Quantcast’s Chief Revenue Officer.

TechCrunch is reporting that Google and Yahoo both lost two important employees. Google lost Richard Kimber, Google’s Managing Director of Sales and Operations for South East Asia, to Friendster. Yahoo lost Adam Hyder, Yahoo’s Senior Director of Engineering for its Advertising Management Platform, to Jobvite.

Richard Kimber will be the new CEO of Friendster, and the old CEO, Kent Lindstrom, will become Senior Vice President of Corporate Development. Adam Hyder is joining Jobvite as the company’s new CTO. Previously, Jobvite hired Yahoo HotJobs leader, Dan Finnigan, as its CEO.

The rumors that Twitter will be buying Summize have now been confirmed. Twitter, the popular micro-blogging platform, has acquired Summize, a search engine that searches Twitter.

You can read all the news at Techmeme and also make sure to check out Danny’s write up on Summize named Summize Gains “Local” Twitter Search Option.

There’s a ton of search-related news and intrigue coming out of the Dow Jones “All Things D” conference in Southern California. Let’s start with the ridiculous remark from IAC’s chief Barry Diller that “Google is irrelevant to us.” That’s only true if Diller doesn’t care about search revenue. Google is essentially the source of that revenue for IAC.

He also reportedly said, “I believe our product is in most respects better than Google,” and that he thinks Google’s dominance cannot last indefinitely in search: “At some point Google will not live ever after with 60 or 90 percent of market.”

Ask 3D was certainly more daring in most respects than Google’s Universal Search, but arguably the core relevance of search results on Ask doesn’t match Google. Diller’s statement about Google not being dominant forever is a kind of bland truism about all market leaders.

On to Yahoo and Microsoft. On the All Things D blog itself there’s a fairly extensive summary of Walter Mossberg’s interview with Yahoo CEO Jerry Yang and President Sue Decker. Mossberg was very pointed in his questions about Yahoo’s strategy, its potential relationship with Google, and the failed Microsoft merger. It appears to have been a frank discussion with no new revelations about strategy.

Yang compares the failed Microsoft bid to the breakup of a high-school romance: “It’s like when you break up with your girlfriend in high school. It very quickly becomes he-said/she-said. I don’t want to look back. But I think we both understand that there is a tremendous amount of power in a combination like the one Microsoft proposed.”

Yang also says, “I’m the best person to run Yahoo.” He and Decker also apparently make lots of general statements and claims about exciting future plans and products, but with few specifics other than what’s already been announced elsewhere.

Yang apparently played golf with Steve Ballmer (his ex-girlfriend?) over the weekend, according to the Wall Street Journal, but no deal emerged. The full buyout is off the table and what they apparently discussed is Microsoft’s current interest in acquiring the search/search advertising business.

News Corp. Chairman (and owner of All Things D parent Dow Jones) Rupert Murdoch was also in the hot seat at the conference (coverage also on Barrons). He said that he was impressed that Yahoo held off Microsoft’s charge but also expressed that he doesn’t see the company succeeding in search or appeasing shareholders with a Google deal. He also dismissed the Carl Icahn proxy challenge to Yahoo’s board, saying that it “wasn’t serious.” As a practical matter, Microsoft’s abandonment of its takeover quest for Yahoo appears to thwart Icahn’s ultimate ambition to restart the merger discussions.

The Murdoch interview appears to have been the most interesting and candid and also the most free-ranging. It ran the gamut from the state of the US newspaper industry to online social networking, video distribution, search, and the US presidential election (the traditional conservative Murdoch appears to be leaning toward Obama).

All Things D’s Kara Swisher asked, “How do you look at Google right now?” Murdoch responds, “We love them . . . We think they’re fantastic, the greatest company in America. But you don’t want anyone to be a monopoly.”

Finally, Facebook CEO Mark Zuckerberg and new (ex-Googler) COO Sheryl Sandberg took the stage to discuss the state of all things Facebook (summarized by Barrons). Facebook has been poaching a steady stream of Google employees and has become something of a “second front” for Google, with Microsoft being the primary one. Yet, Zuckerberg’s tone was conciliatory: “I’d like to work with them on something.”

Hmmm . . . “something.”

For her part, Sandberg had nice things to say about Microsoft. Barron’s paraphrases her: coming from Google, you don’t spend a lot of time at Microsoft; it’s a good partnership; it will continue to be important. Most of the discussion about Facebook’s business model and future advertising plans was about brand/display and trying to further innovate in those areas following the Beacon debacle.

It remains a mystery, however, that the company doesn’t implement web search and related monetization on its site (see Microsoft’s Facebook Ad Deal Doesn’t Include Search). Perhaps that was the “something” that Zuckerberg was alluding to with Google. We’ll see.