Last year, Google and Yahoo were denied a deal that would have left Yahoo with its own search technology, after the US Department Of Justice rattled its anti-trust saber. This year, Yahoo’s pursuing a deal to sell off its tech to Microsoft. While Google CEO Eric Schmidt sees his company’s former deal as “part of history,” he said Google still feels an “independent” Yahoo is important.

Yahoo CEO Carol Bartz is banking heavily on the idea that Yahoo can stay competitive in search even without its own search technology. I wondered if Schmidt agreed, given how much he knows Google spends on its own technology. Last week during an interview, I asked if he felt Yahoo could stay a competitive player, if it gave up its search tech.

Schmidt dodged answering that one, saying he wanted to avoid specifics, as Google hasn’t taken an stance on the deal:

We have not taken a position on the deal. First place, as you know we proposed a deal which we came within an hour of being sued by the U.S. government over. So, in the annals of Google and Yahoo, that’s the deal we would like. And obviously that can’t happen right now. So I think it probably would sound like spoiled, whatever the term is, complaining to talk a lot about the Yahoo-Microsoft stuff. Historically Microsoft has not been a very good partner in these things. And so we’ve decided to take the perspective of just waiting. Let’s see more. I’m trying to avoid answering a specific question about Yahoo. Because one, I think it’s a little unfair for me, and second is that we truly don’t know.

But Google has taken a position to some degree, putting out this statement after the deal was initially announced:

There has traditionally been a lot of competition online, and our experience is that competition brings about great things for users. We’re interested to learn more about the deal.

In other words, the search space currently has Google, Yahoo and Microsoft currently as major competitors. The worry in that statement is that the Microsoft won’t leave Yahoo as competing. In contrast, when Google announced its proposed deal with Yahoo, the fact that Yahoo would keep its technology was positioned as important for Yahoo to stay strong. When I raised this issue, Schmidt reflected lightly on the differences between the two deals and how ultimately, he thinks an independent Yahoo helps search competition:

There are some significant differences. As we understand it there are some significant differences in the deal. In our deal it was non-exclusive. In our deal they would remain in the search space. In our deal they would maintain a direct advertising sales force. There are quite a few differences. But as I said, that’s not a deal that we could get through today, and we didn’t get it through in November. So it’s sort of like, what’s to say about it? It’s part of history. We took a very strong position that an independent Yahoo was important. And I think that remains our view. Because an independent Yahoo means more competition in the space in general. It’s better for advertisers, it’s better for content. You know, Yahoo has basically become a good company.

The Microsoft-Yahoo search deal isn’t a forgone conclusion. In fact, news out yesterday suggests the companies may face serious regulatory hurdles. Potentially, it won’t be allowed. That leaves me wondering. What’s Yahoo’s Plan B? Does it even have a backup plan, especially when CEO Carol Bartz has suggested Yahoo can no longer run search on its own?

In June — before the deal was announced — Bartz said this to the world:

“Yahoo doesn’t have to do anything with Microsoft about anything,” Bartz said at an investor conference.

Three months later, she reversed herself. A New York Times interview has her saying Yahoo couldn’t afford to do search on its own:

Ms. Bartz said she sold the search business because Yahoo could no longer continue to match the level of investment Google and Microsoft were making in searching, one of the Web’s most lucrative and technologically complex businesses.

Who does this? It’s like trying to sell a bricks-and-mortar business and saying you’ve got no choice but to do so. You’re not going to get a good price from your buyer (Microsoft), if they think you’re desperate or have no alternative (Yahoo’s already been barred from doing a deal with Google).

Worse, what if you DON’T sell that business? Are you just going to board it up? Are you going to shop it around to other buyers who realize you’re even more desperate now? Do they want to buy a business that you’ve said can’t afford to run?

That’s the situation Bartz is in if Yahoo can’t sell its search assets. Meanwhile, Yahoo employees keep leaving. Doug Cutting who left last month said his departure had been in the works for months and had nothing to do with the recent deal that was announced.

I totally believe that. I figure months before this, Cutting was smart enough to see Yahoo was done in search and wanted to move on. I suspect more people will be like that, and when Bartz has continued to suggest that Yahoo isn’t a search engine — even denies it ever was one — it just doesn’t seem that inspiring for anyone who wants to be involved with search.

Oh, but the user interface will be key! Bartz pushed that once again in a television interview out yesterday, likening search technology to being like an Intel computer processor that you build a computer around. IE — see how successful companies like Microsoft, Apple or HP have been without owning the processor? Yahoo can be the same without owning the “search processor.”

The UI isn’t going to change anything for Yahoo. In case there’s any mistake, I’ll say it again as clearly as possible:

USER INTERFACE CHANGES WON’T LET YAHOO COMPETE IN SEARCH

Got it? Write it down, someone come check back on this in five years. If Yahoo’s moved up in search share thanks to outsourcing search and just toying with the user interface, I’ll eat those words somehow — covered even in Yahoo purple frosting.

No one has succeeded as a general search engine just by making user interface changes. No one, in the past nearly 15 years of us having search engines. That’s like 150 “real” years. (For more, see A Search Eulogy For Yahoo and Why Search Sucks & You Won’t Fix It The Way You Think)

The interview ticked me off in other ways. Bartz downplayed search as something people spend only 3% of their time on. Hey, I don’t spend all my time shopping. But who do you think makes more money off of me, places I shop at or television stations that deliver me entertainment?

Bartz also joked about how “I don’t wake up in the morning and think gosh, ‘What am I going to search for’.” This was in reaction to one of the CNBC hosts interviewing her joking how Google’s big change to its home page was to make the search box larger. Yahoo, you see, is that central place where everyone starts their day.

Ha, ha, ha. Let’s laugh all the way to the bank, shall we? That “plain” home page earns plenty of money for Google from all the people who go there and, um, search on it. Making the Google search box bigger was a simple but effective change. Gosh, I’m pretty sure one of the Yahoo home page changes (it’s hard to keep track of them, as that page seems to change so often), was to make its own search box bigger. Let’s also put our heads in the sand about the fact that Google has a personalized home page service, iGoogle.

Bartz does an amazing job talking about all of Yahoo’s properties and downplaying Google as if it doesn’t compete in some of these same areas. I agree. Yahoo is a huge leader in many areas, as I wrote in my Yahoo The Failure: Myth Versus Reality piece last year. But Google does compete in a variety of ways. It’s investing in search AND in portal features. So’s Microsoft. It’s Yahoo that’s pulling back.

Watching that interview, I remarked on Twitter that Bartz is coming off with me like some type of Sarah Palin of search (Silicon Valley Insider got a kick out of that). I watch her do these TV interviews, and she’s got this “aw shucks” and “straight shooting” delivery that makes you want to believe in the things she’s saying, regardless of how they’re being spun. For me, the problem is that I know search too well for that type of spin to work on me. I just find it irritating.

I also find it amazing. Bartz is working so hard to marginalize search (last I looked, the second most popular internet activity after doing email). She’s working so hard to say that Yahoo has to give things up to Microsoft. What if she can’t dump search. What’s the Plan B? How do you recover running search on your own after having chopped off your own legs?

Those with BT broadband in the UK have noticed that the Yahoo/BT portal at bt.yahoo.com has a new search technology provider. You would guess that if Yahoo would replace their own search technology, it would be in exchange for Bing, in light of the recent news about the Bing & Yahoo deal. You would be wrong to think that because Google is now powering the search technology Yahoo/BT portal.

Here is a screen capture of the search box that now says, “Powered by Google,” taken from ConnectedInternet.co.uk, which tipped us to this:

I know the Yahoo and Microsoft deal has not been signed off on yet, but you have to admit, this is a bit comical?

The New York Times has an interview out with Yahoo CEO Carol Bartz where she declares that Yahoo has “never been a search company.” Astounding, in that that this is not true.

Part of me thinks, “Why bother arguing?” As my A Search Eulogy For Yahoo post from last week explains, whatever Yahoo was, if the Yahoo-Microsoft search deal with goes through, Yahoo’s done as a search engine. Heck, Bartz had effectively taken it out of the search game weeks before the deal was announced by backing away from search as a feature.

Even if the deal should fail — Yahoo is still finished as a search player, now that Bartz has declared to the world that her company apparently can’t even afford to keep up. There’s no going back from that.

But part of me doesn’t like history being rewritten, especially by a CEO who should know her own company’s history. Yahoo was indeed a search engine. It was the very first “feature” that Yahoo offered. Long before email, or IM, or Yahoo Sports or Yahoo News, there’s was Yahoo the search engine.

Search was Yahoo’s origin story. To say Yahoo was never a search engine is like saying Superman wasn’t originally from Krypton or that Spider-Man was never bitten by a spider.

Yes, at first Yahoo’s search was powered by human editors, rather than machines. By 1999, the majority of search engines out there used human editors as the basis of their search. When machine-based search took over, Yahoo shifted along to that eventually, spending plenty for its own technology.

Over the years, I’ve received plenty of Yahoo press releases highlighting that Yahoo was a search engine; was in plenty of briefings where this was discussed. Yahoo spent on plenty on commercials to tell consumers this, such as the one below:

So please, spare me the talk about how Yahoo was never a search engine. It was.

It’s not now, nor is it going to be in the future. As the New York Times piece gets into, Bartz is happy hoping Yahoo hangs on to the 20% share of searches it still has as a legacy from its glory days. There’s apparently no intention to try and grow this.

The NYT piece also highlights how Yahoo expects to move even more firmly into the original content area. The company has long struggled with this. Is it a search engine that points outward to resources, or is it a content company that produces its own material? Clearly, it’ll be a content company — and maybe it will be more successful with that this time without all that search baggage.

Postscript from Greg Sterling:

A couple of years ago Yahoo certainly did consider itself a search company, with a competitive search engine. Said then SVP of search and marketplaces Jeff Weiner in 2002:

“Our objective is to provide the highest-quality search experience, and to be the leading provider of search [technology] on the Internet”

That quote appeared in an article on the heels of Yahoo’s $235 million acquisition of Inktomi in which the following paraphrase of Weiner’s remarks on search also appeared:

Yahoo feels that it can provide a better searching experience to its users if the company uses in-house engineers and assets instead of licensing technology from another company, Weiner said.

The market also thought Yahoo was trying to compete in search because there was immediate criticism and concern voiced over then Yahoo CFO Sue Decker’s 2006 comment:

“We don’t think it’s reasonable to assume we’re going to gain a lot of share from Google,” Chief Financial Officer Susan Decker said in an interview. “It’s not our goal to be No. 1 in Internet search. We would be very happy to maintain our market share.”

Decker was forced to clarify her remarks and backtrack later. Yahoo CEO Carol Bartz’s remarks seem to be something of a replay in an effort to manage expectations now that Yahoo has formally exited the search business.

Postscript from Danny Sullivan:

In various places, I keep seeing people talking about how Yahoo “outsourced” search for most of the time, bringing in names like AltaVista, Inktomi and so on. Yahoo did NOT outsource search for most of its life, and I’ll detail this for the record, below.

March 3, 1995: Yahoo’s birthday, as the company recently reflected upon. Yahoo operated before that, but this was when the company was officially incorporated. The ONLY product was search. You either browsed for web sites by following categories or you did keyword searches.

Behind the scenes, Yahoo used editors who categorized web sites to create its core listings. This was a “directory” model to search. Yahoo was unique among the early players in doing this. That did NOT mean Yahoo lacked search tech. Those directory listings had to be searched through, and quickly, and you needed relevancy algorithms applied to them.

In contrast, there was also the “crawler” approach to building listings, which is commonplace today. This is where search engine automatically visit web pages, make copies of them, then return the most relevant pages first (as best they can guess using search algorithms). That involves much more tech.

Early crawlers were good when you needed to find the needle in the haystack (”long tail search”, but the relevancy was bad for common queries, such as trying to find an official site or the best site for a popular term. Directories did much better at this — and that is why Yahoo grew in popularity over its crawler-based rivals, at first.

Yahoo did outsource to a crawler partner to provide “backup” if it had nothing for a search query out of its own database. The first partner for this was Open Text. You would only see Open Text listings if Yahoo had no listings of its own. The main listings always came from Yahoo.

Mid-1996: Yahoo partnered with AltaVista for its crawler-based backup results. The primary search results on Yahoo still came from its own directory, using its own search technology.

Mid-1998: Yahoo partnered with Inktomi for its crawler-based backup results. Again, primary search results on Yahoo came from Yahoo’s own directory, using its own search technology.

Mid-2000: Yahoo partners with Google for its crawler-based backup results. Same thing as with the other partners — Yahoo’s own listings were still the main ones that searchers saw, using its own editors, its own search tech.

Oct. 2002: Yahoo renews with Google and makes a dramatic shift to its search results. For the first time, crawler-based results are used for the main listings. They’re enhanced with references to the Yahoo Directory, but by and large, Yahoo was simply rebranding Google. This is the first time Yahoo really outsourced its search listings.

Feb. 2004: Yahoo ends use of Google’s search listings in favor of its own crawler-based search technology. In the time since renewing with Google, Yahoo went on a crawler-based technology shopping spree. It announced a deal to buy Inktomi at the end of 2002, completing that in early 2003. It also purchased Overture (formerly GoTo), known primarily for its paid search technology. But Overture also itself had recently bought both the AltaVista and AllTheWeb crawler services. Technologies from all these sources were blended together to create Yahoo Search.

Aug. 2009: Yahoo Search continues to power Yahoo’s main listings, but a deal with Microsoft would give up that technology next year. Yahoo would outsource for the second time in its history — and this time, for good.

The Outsource Myth

As you can see, Yahoo fully outsourced its search listings only once in its 14 1/2 years, from October 2002 through February 2004. That’s a total of 16 months. So for 91% of its time, aside from that tiny window, Yahoo was running its own search tech. It devoted substantial resources to search technology during the first 7 years when it used a directory system. It devoted even more substantial resources over the past 5 years it has been using a crawler-based model. To say Yahoo was never a search company simply flies in the face of the evidence.

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

By now, everyone has read all about the news that Yahoo is replacing its search index with Microsoft’s Bing. In a way, it’s a great story of complete reversal, as in 2002, Microsoft didn’t have its own index and instead used Inktomi. Late that year, Yahoo! acquired Inktomi, which spurred Microsoft to start building its own search index to avoid having a search supplier owned by a major competitor. Now Yahoo is ditching its index (including all of the technology it acquired with Inktomi) to use the very index it motivated Microsoft to build.

We’ve read about what this means for advertisers (more overall traffic from the combined audience, use of Microsoft adCenter for self-serve and Yahoo!’s sales force for premium) and for searchers (they likely won’t notice), but what does the deal means for those who create websites: publishers, web developers, and SEOs?

Web Developers

The hardest hit by this change will likely be developers. Over the last couple of years, Yahoo seems to have shifted its focus from innovating the search index to innovating its developer offerings: encouraging third-party development and creating a “developer ecosystem” for search.

Any developer options that don’t rely on the Yahoo search index may be unscathed. In particular, the non-search development tools and search-related offerings that are solely focused on the user interface may continue to be supported. While Bing will power Yahoo’s search engine, Yahoo will control their user interface and likely will try to continue to differentiate there. That’s means Search Monkey, which enables site owners to enhance how their results appear on Yahoo, is potentially safe.

Build Your Own Search Service (BOSS) likely won’t be so lucky. BOSS is built on the Yahoo index as its foundation. A company can build their own search engine using Yahoo’s underlying technology and differentiate via the user experience.  Essentially, that’s what Yahoo is planning to do now with Bing as their underlying technology. No more Yahoo index likely means no more BOSS. Yahoo all but concedes as much: “We can tell you that BOSS will remain live for the time being.” What does that mean for companies like hakia, OneRiot, Daylife, and Cluuz? And for that matter, all of the developers using BOSS who are now filling the Yahoo BOSS message boards with questions?

On the Yahoo developer blog, Yahoo commented that “For SearchMonkey and BOSS, we currently do not have anything concrete to tell you. Clearly, we’ll need to work with Microsoft to determine what makes the most sense for you and for us.” If BOSS’s future is left up to Microsoft, I have no doubt that future will involve migrating BOSS users to the Bing search API. In order to continue to support BOSS, Microsoft would have to completely recreate it to work with the Bing search infrastructure. Why would they do that when they can increase the audience of a product they already have? It’s possible they’ll add some of the unique BOSS features their search API (such as unlimited queries, ability to mash up the data with other sources, and ability to tweak ranking signals), but I wouldn’t hold my breath. The Yahoo BOSS team is just as in the dark as the developers wanting answers. From a message board post: “What specifically does it mean for BOSS? Honestly the team is still absorbing the implications and we just don’t know.”.

BOSS users could switch to Google’s Custom Search API, but it is more restrictive than Microsoft’s offering, and isn’t really well-suited as the foundation of a search engines or other commercial company. Several other companies offer web indices, such as CommonCrawl and Alexa, so perhaps they or a new company will take advantage Boss’s imminent demise and offer matching features.

Any Yahoo offerings that don’t rely on an underlying index, such as the Yahoo User Interface library are likely going to remain. Yahoo confirmed this in their blog post:

“We’ve also received questions about the future of Yahoo!’s other developer offerings, such as YUI, YQL , and Pipes. We wanted to let you know that today’s news does not affect these products. None of our other non-search developer products are affected.” [Emphasis mine.]

However, look for any search index-based offerings (such as the Maps API and Local API) to be deprecated in favor of the Bing equivalents once the deal goes through.

Search Engine Optimizers and Site Owners

What about those who are concerned with getting customer acquisitions through organic search? How will this change impact them? From a traffic perspective, take a look at how well you’re indexed and ranked in Bing. That’s how well you’ll be indexed and ranked in Yahoo. What do your titles and descriptions look like in the results in Bing? That’s how things will generally look in Yahoo. This might not be a bad thing for site owners, as over the last year, Yahoo’s search quality seems to have been declining to the point that I’ve been wondering if their engineering team had already begun to be phased out or least was spending a lot of time at the bar mourning the likely phase out.

Just as you don’t need to optimize separately for AOL since they use Google’s index, you won’t need to optimize for Yahoo since they’ll use Bing’s index. The exception to this may be in how Yahoo displays results. We’ll have to wait and see exactly what this means, but Bing has been trying to differentiate in display and it supposedly, Yahoo will continue to do that as well. This may mean, for instance:

• SearchMonkey will continue to be important as a way to stand out in the results.
• Hmm. I can’t really think of anything else.

My guess is that the robots-nocontent tag will no longer be supported, since Bing’s infrastructure doesn’t support it. The search engines have already come together to standardize their support of robots.txt and XML Sitemaps, so site owners shouldn’t worry about changing anything with those.

The bigger issue many SEOs are concerned about is Site Explorer. Site Explorer is one of the more reliable tools for competitive backlink research. You can see a substantial list of links to any site, generally ordered according to value. That’s useful stuff! Both Google and Bing Webmaster Tools provide backlink data, but only for your own sites. Yahoo will be unable to maintain Site Explorer without a search index of their own. Will Bing take it over? Well, it could add the feature to its Webmaster Tools, but Microsoft has historically been moving the other direction. They removed the ability to query their index for link data with the link: operator in 2007 and have never brought it back for competitive research.

Microsoft likely won’t be motivated to add a feature that they specifically chose to remove. And it’s not trivial to build the code to query for competitive links and store the data. Believe me, I know. I managed the process for adding non-competitive backlink data to Google Webmaster Tools. As with the potential end to BOSS, the potential end to Site Explorer opens up new opportunities for third-parties. In fact, the same companies who build a web index could provide competitive link data. Currently, SEOmoz  provides Linkscape, which offers some similar features. (Speaking of SEOmoz, Rand Fishkin posted yesterday about the SEO impact of this deal.) Majestic SEO and Exalead provides link data as well.

More generally, will Microsoft step up its efforts with webmaster relationships? Yahoo used to have a fairly significant presence in the community. In addition to Site Explorer, they were a constant at conferences and participated in online discussions. That participation has declined lately, coinciding with the decline in search quality. Microsoft seemed to be rallying with its webmaster relationships with the launch of the Webmaster Center in November 2007. But Microsoft hasn’t updated the Webmaster Center with new features since August 2008. (A minor release in November didn’t add  new features).

Microsoft didn’t respond to my questions about their current and future resource investment in this area. They did recently release a rudimentary SEO Toolkit, although it requires Windows Vista and IIS 7.0 to run.

And what about paid inclusion? Yahoo has long offered Search Submit Pro, which essentially enables sites to pay to be included in the organic listings. Microsoft doesn’t offer a similar product and while it’s certainly possible that Microsoft will add this product to their offerings, paid inclusion is quite a substantial shift in overall approach to organic search. It’s less about the ability to implement the technology and more about belief around what constitutes an “organic” index. Danny Sullivan asked about paid inclusion at the announcement press conference. Carol Bartz, Yahoo CEO replied, ” Paid inclusion, we’ll decide on that later.” But it would be difficult for Yahoo to continue the program on its own, as Yahoo will no longer have control over what pages are included in the search index.

In the end, it’s about the traffic

The big question is will this partnership significantly change market share percentages? Depending on whose numbers you use, Google has either 65% or 74% share in the US (more in some European countries). That puts the combined Yahoo/Microsoft share at 28% or 25.5%. That’s substantial traffic, sure, and worth paying attention to. But what will the share look like in three years once the deal is done and we barely remember Yahoo ever had its own index? My guess is pretty similar to how it looks now. Except Google will probably have slightly higher share. I just don’t see anything game changing here that will cause a mass exodus from the status quo. But I’ve been wrong before. What I do know is that site owners who have ignored how their sites were doing in Bing until now do to low traffic numbers will likely start paying a lot more attention.

What a day! Still trying to digest all the news about the Yahoo Microsoft search deal? So are we. While answers are still coming in, here’s what we know so far.

In a nutshell, what just happened?

Yahoo and Microsoft both have behind-the-scenes technology used to generate those listings you get when you perform a search. Yahoo’s going to give up their technology and use Microsoft’s.

Why’s Yahoo giving up that technology!

Running that technology is costly. Rather than own the technology, Yahoo feels its more economical to lease it from Microsoft.

Doesn’t it also cost Microsoft a lot of money to run the technology?

Yes, it does. But Microsoft has no choice but to run it. It wants to compete with Google. To do so, Microsoft built its search technology several years ago. It’s already doing the work, so leasing its results to Yahoo is sort of like icing on the cake. It gets Yahoo to contribute some money toward work it had to do anyway.

But doesn’t Yahoo compete with Google like Microsoft and need search technology of its own, too?

Hush, don’t let Yahoo CEO Carol Bartz hear you say that! She might drop the F-bomb on you. Bartz has been positioning Google as a “search engine” while Yahoo is, um, a “place where people find relevant contextual content about things they care about.” Um, “the center of people’s lives.” Um, um….

How about portal? People used to use that word, portal. It meant a place where you go to get your email, maybe check your stock portfolio, have an account for instant messaging, and lots of other things. Yahoo’s got a ton of amazing “properties,” which are topic-specific areas of information such as news, sports and finance. They want to focus on that. By outsourcing search, Bartz argues Yahoo can do a better job with its content areas. From today’s press conference, she said:

This deal enables us to keep a healthy revenue stream and invest in areas critical to our future, while Microsoft invests in search technologies.

We want to invest in what is really important to our future success, including winning audience properties, display advertising capabilities, and mobile experiences.

You distracted me with that F-bomb reference! What’s up with that?

She did it once to analysts back in April. Many folks like the tough spirit it seemed to show. Made for fun in a stage whisper at the D conference, too. It didn’t make an appearance today. Maybe in the future, if the deal doesn’t go well.

Don’t Google and Microsoft both have these “portal” features, too?

Yes, yes they do.

Well if they have portal stuff and search, and Yahoo has only portal stuff, doesn’t that mean Yahoo’s weaker?

Maybe. Maybe not. Google’s kind of a stealth portal. You don’t easily know they have things like Gmail or news or a finance area. They lack much of what Yahoo has. Microsoft has its whole MSN area, and that’s not going away — but Yahoo’s also been largely ahead of it. Perhaps staying firmly focused on portal stuff will indeed payoff the way Yahoo hopes. But let’s talk more about this in a bit, OK?

OK. So Yahoo won’t have search?

Yahoo will have search. It’ll just be provided by Microsoft.

Oh, so when I search on Yahoo, I’ll be taken to Microsoft?

No. You’ll do a search, and you’ll get results back just like you get now. The main difference is at the bottom of the page, it’ll say “Powered By Bing.”

What the hell is Bing! I thought this was a deal with Microsoft?

You’re new around here, right? Missed all those Bing TV commercials? Bing is the name of Microsoft’s search engine.

Bing? Seriously?

Hey, I suggested they call it Microsoft Search. But it’s kind of grown on me. And I also suggested that Microsoft CEO Steve Ballmer keynote at one of our Search Marketing Expo events, and he is at SMX West 2010. He also looks like a genius now for getting Yahoo at a firesale price. So let’s not question Microsoft’s naming move.

You guys do search marketing events?

Yeah, see the SMX site. The next big one in the US is in New York this October. But I think the product drops are getting annoying. Should we move on?

Yeah, so Microsoft has this new Bing search engine — but it’s doing a deal with Yahoo? Is Microsoft giving up on Bing?

Shhh, don’t let Ballmer hear you say that! He’ll throw a chair (that’s just a rumor; it was never confirmed). Or perhaps stab you with a giant pen (he didn’t stab anyone, but this picture of him holding a giant one to sign the deal with Yahoo is dang funny. So are the comments).

Look, Microsoft has had its own search engine for several years. That’s all part of the plan to take on Google. Last month, it was given a facelift, some improvements and the new name of Bing. We even have a big article to tell you more about it: Meet Bing, Microsoft’s New Search Engine.

Bing will continue. It’s not being closed or reduced in any way because of this deal.

So when I’m searching at Yahoo, I’m also searching at Bing?

Kind of. Like I said, Yahoo’s listings will really be Bing’s listings, just all dressed up to look like they’re from Yahoo. Think about how some manufacturers make the same product sold to different brands.

But if it’s actually Bing at Yahoo, why would I go to Yahoo? Why not just go to Bing and search?

Microsoft certainly hopes you will! As for Yahoo, Bartz’s view is that people aren’t coming to Yahoo to do searches. They’re already at Yahoo to do something else, like check their email or horoscopes. While they’re visiting, they may want to do a search. So Yahoo doesn’t have to be better than Bing. It just has to have search available.

So Microsoft and Yahoo compete yet cooperate?

Yes. It’s called coopetition. Isn’t that a cute word? See cooperate + competition? It was all the rage in the past. It kind of died out lately, especially in search, when everyone felt they had to own their own search technologies. It’s making a comeback, baby!

So when’s this big change happen?

Both companies hope to close the deal in “early 2010.” Then they’ll implement the deal in major countries around the world, the US being one of them. They say the transition will take three to six months. So those Bing results should be showing up on Yahoo between summer to fall of 2010.

That’s a year away!

Yes. There’s a lot of approvals to get, but we’ll talk about this in a bit. Also, transitioning the ad side will take longer.

Ad side? What the heck does that mean?

Sorry, it’s been a long day. Lots of buzzwords and jargon flying around. OK, remember I said that Yahoo and Microsoft both had their own technologies to create those search listings? (Google has its own too, by the way). There are actually two different types of listings that show up, each with its own technology. Call these free listings and paid ones.

Free and paid listings? You’re losing me!

It would really help if you came to one of our conferences. We do a boot camp track covering all these fundamentals. There’s really good food. We guarantee satisfaction. But here’s the short story. You know when you read a newspaper, how there are the news article and then those ads off the side?

I thought newspapers were dead?

Well, they have some troubles. But it’s a good metaphor to use.

OK, so news articles versus ads in newspapers are like what to search engines?

Well, Google, Yahoo and Microsoft (the top three search engines) all have free listings. Or “editorial” or “organic” listings. These are results that show up because the search engine thinks it makes sense editorially for them to be there. That the user wants them there, and if they’re not provided, the searcher won’t be happy. There’s a search technology used to create these listings.

I get it. There’s also paid listings with their own technology!

Clever you. Right. Advertisers can also pay to show up for certain words. So if you sell comic books, you could buy an ad that would appear whenever someone searched for the words “comic books.” There’s an entirely different technology used to manage all those listings.

So when’s that paid listings technology from Microsoft coming to Yahoo?

That’s expected to take about a year after the deal closes. So in the major countries, paid listings will come from Microsoft by early 2011.

When’s everything completely transitioned?

All listings will be “powered” through Microsoft’s technology on Yahoo sites around the world two years after the deal closes, so early 2012, if things go as planned.

Like the movie 2012?

Yeah, out in November with John Cusack. Who I have a serious mancrush on. So it’s going to be an awesome film.

I feel this Q&A format is taking too long to go through!

Look, haven’t you seen enough bulletpoint summaries at this point? I’ve read enough. Can’t we have a little fun. We’re almost over the hump, I think. Plus, did you know at the end of the 2012 trailer they say “search: 2012″ and that if you actually search for 2012 on Google, they come up in the top listings? And if you do that at Yahoo, you get this really cool “movie” box at the top. See, this is relevant because it highlights how even when it’s powered by Bing, Yahoo might do things to make its search different from Bing.

I thought Yahoo didn’t care about being different from Bing and competing with them or Google?

Well, it gets confusing. That’s because Bartz also said that Yahoo will keep improving the search user experience. See, here’s what she said from the press conference:

Through this agreement, Microsoft will provide the search technology that will enable us to innovate for an even better user experience for all those who come to Yahoo!

So they do kind of care about being different. And Yahoo has a variety of things that set it apart from other search engines like Search Assist, which suggests terms for you to search on.

How can Yahoo offer Search Assist if it is giving up its search technology?

Good question. Microsoft will be in charge of providing Yahoo with search listings, but it won’t be dressing them up, so to speak. All the “UI” stuff remains up to Yahoo. UI is short for user interface, which is the look-and-feel of those search results. Sometimes UX is used, which stands for “user experience.” So Yahoo will still have search folks, but they won’t be focused on the process of gathering listings. Rather, thing of them as stylists.

So things like SearchMonkey will keep going?

Oh, look at your. One minute you don’t know the difference between free and paid listings. The next, you ask about SearchMonkey. That’s a way of dressing up listings. And since it’s dressing up, it might seem like it remains with Yahoo. But it also involves the Yahoo API, and that’s apparently moving to Microsoft’s responsibility.

Huh, API?

Don’t worry your pretty little head about things like that. OK, I won’t get into what the acronym stands for. It’s just a way for computer programs to talk to each other automatically and do magical cool stuff. Yahoo has a number of “search APIs” people use now, and these go away when the transition happens.

Will Microsoft provide all the same APIs?

Yes. Maybe. Probably. We’ll see. Geez, why do you want all these specifics!

Look, Microsoft has told us (and News.com) on this issue that they want to review everything and keep supporting all the stuff that seems cool and worthwhile.

What about that BOSS thingy I’ve heard about?

So BOSS stands for Build Your Own Search Service, but since BYOSS looks weird, the Y gets dropped. It lets anyone build their own search engine using Yahoo’s search technology. But since Yahoo’s no longer going to be building their own search engine, well, they can’t really provide that to others. If BOSS continues, that will be up to Microsoft to maintain.

(NOTE: See also our new What Site Owners, Web Developers & SEOs Should Know About The Yahoo Microsoft Deal story).

So all this search technology Yahoo has is going to waste?

Well, Yahoo won’t be using it. But as part of the deal, Microsoft gets the exclusive right to use it for 10 years.

So will Microsoft integrate the Yahoo search technology into Bing?

Um, um. Well, at the press conference, Yahoo’s Bartz said:

They will integrate our technologies into Bing and adCenter, which will serve both our search networks and theirs.

By Bing, she means the technology used to make free listings. by adCenter, she means the tech behind paid listings.

Later, Microsoft’s Ballmer said:

Our engineers know Bing, and so obviously our engineers will build from the Bing platform. But, there’s a lot of both engineering know-how, code, et cetera, and in the details, no, we haven’t looked at Yahoo!’s code, and blah, blah, blah, blah. But we wanted to make sure that we could put together the integrated value of our expertise and code and Yahoo!’s expertise and code. So, when Carol talks about engineers joining the team, that’s expertise. We have a license to code. There are smart things, certainly I think it’s well-known that Qi Lu, who runs our online business, spent a lot of time at Yahoo!, has a lot of respect for the intellectual property and value that’s been built into Yahoo!’s site. Exactly what that looks like, whether it’s rip and replace the six lines of code, or choose the expertise, and integrate, but we’ll build from Bing, integrate good value, good technology from Yahoo!, but because it’s not the way the deal is structured, the burden is on us to deliver the goods and to enable Yahoo! to be successful, and make the RPS guarantees, but we’re very pleased that it’s not just a rip and replace. We have the luxury of getting full integrated value out of this thing.

All clear? Potentially, some parts of Yahoo’s technology could be incorporated into Bing. Some of it probably will get used But as best I can tell, Microsoft doesn’t have to anything at all. By getting the exclusive rights to Yahoo’s technology, the most important thing for Microsoft is that Yahoo is giving up its own rights to use the technology.

What happens to the technology after the 10 years are up?

Good question. That’s not clear either. Potentially, Yahoo could take back control of its technology. If it does this, it’s not clear if Microsoft would then have to rip those parts out of its own systems.

Realistically, it doesn’t matter. Search technology evolves fast. Remember DOS? Don’t? Man, I’m old. Well, DOS was an old computer operating system where you had to type everything in, the mouse didn’t exist at first to move stuff. It was pretty clunky. Well, Yahoo’s technology is 10 years will feel like DOS compared to the “Windows” operating system we use on Windows PC or the Mac today.

Yahoo won’t want it back. It’ll be too old. They’ll either need to start again from scratch (and be hugely behind Google and Microsoft) or continuing partnering with someone else who has good search tech.

But Yahoo’s not worrying about all this because they figure this deal will turn into a “lifetime partnership.”

What’s up with all this talk about scale? Do the two combined really improve search as they say?

The partners argue that somehow, more advertisers will translate into better search results which will translate into more consumers. I’ve been writing about search a long time, and this part makes my head hurt. My eyes scrunch up, and I try to figure out what I’m missing. Let me translate what they say into the real world.

It’s like saying that by having more TV advertisers you’ll get better TV commercials with means you’ll get better TV shows. Now to me, the TV ad quality and the TV show quality are pretty much unconnected. They don’t help each other. That’s slightly simplistic when it comes to search, but it’s not that far off the mark.

So no, I’m not buying the suggestion that all this scale stuff will improve search results.

How about scale being needed to beat Google in advertising?

See, you’re getting savvy again. Yes, it’s likely to help here.

See, if you buy an ad with Google, you reach around 70 percent of the search market in the United States. If you want to reach more than that, today you’d have to open an account with Yahoo to reach another 20%, then another account with Microsoft that lets you reach about 10%. OK, those are rough numbers, but they’re not that far off the mark.

It’s a pain opening all those accounts. But in the deal, you’ll be able to buy both Yahoo and Microsoft at the same time. That lets you reach 30% in one go. Long time paid search guru Andrew Goodman certainly likes it:

We know the power of the search ad platforms, and we know they’ll work better for us with two main ones to deal with, not three. It isn’t too much more complicated than that!

Certainly there’s scale in that advertisers who want to reach a mass search audience have a single source alternative to Google. Buy from Google, and in the US,

And Microsoft will sell all these ads?

Um, um. No. This is one of the most confusing parts. You can buy search ads in two major ways. First, you can go to an online form, open an account, put in your credit card info and start buying ads. You’ll never talk to a sales rep.

The other way is for generally larger advertisers who work with an account representative. They’ve got a personal assistant, so to speak.

In the deal, anyone who primarily works with a human representative will be called a “premium search” advertiser. Yahoo will sell those people. Microsoft cannot. Meanwhile, all those people doing self-serve? They’ll use Microsoft’s forms.

How do I know if I’m a Premium Search advertiser that Yahoo handles?

Don’t call them, they’ll call you. Seriously. Microsoft and Yahoo will be reaching out to all their advertisers about this, they say.

How can Yahoo sell search if they are giving up their technology?

They’ll take care of the customer service part. Behind the scenes, they’ll be using tools that access the same system that self-serve people do — a system that uses Microsoft’s technology.

How long will Yahoo do this selling?

Yahoo and Microsoft say Yahoo is guaranteed this for five years. Then if Yahoo wants, it solely can decide to extend it for another five years.

This seems kind of complicated. What if Microsoft wants to bundle search with other types of ad sales?

Yeah, it does sound awkward. It kind of sounds like mutually assured destruction. With Microsoft locked out of talking to major advertisers on search, they need to help assure that Yahoo’s successful. That seems to be one of the few big gains Yahoo won in this deal, to me. But more on that in a bit.

Aren’t there other types of ads related to search, like contextual or domaining ads?

Look at you, a big fancy word like domaining. Yes. Contextual ads look like search ads — all texty — but they show up on pages across the web. Yahoo doesn’t do that much here, but it is a player. That’s going to shift into Microsoft’s control.

Domain ads. Well, you know sometimes you go to a web site by guessing at a topic and slapping on a .com to the end. You know, for example “wireless mouse” might make you try “wirelessmouse.com.” Some of these sites are great names that attract lots of traffic but they don’t have any really good content. Yahoo does deals to fill them with ads. Yahoo will continue to handle these.

That’s a lot of talk about how paid listings will change for marketers. What about free listings and this SEO stuff?

SEO stands for “search engine optimization,” and it’s all about improving a web site’s traffic from those “free listings.” We have a future piece coming that looks at some potential SEO issues along with one about paid search issues (getting traffic from those paid listings). But since we’ve been without bulletpoints so far, let me do a few quick hit SEO observations:

• If you do well on Bing now but not Yahoo, life in the future looks good
• If you do well on Yahoo now but not Bing, life may get sucky

It doesn’t make sense to start running out and “optimizing” for Bing right now. You’re aiming for a target that’s over a year away. But when the change happens, there might be a compelling reason why some people feel they should strongly consider optimizing content for Google differently than for Bing.

Often, pages that rank well on Google might not do well on other search engines and vice versa. Potentially, by changing the pages a bit while still staying within the general guidelines of a search engine, the page might start to rank better where it’s not performing. But those same changes might hurt where it’s doing well.

Since Google is the biggest source of traffic of all the search engines, many site owners don’t think much about the other players. But with the deal, suddenly one search technology will be responsible for another big chunk of potential search traffic out there. Optimizing specifically for a particular search engine might make a return from when it last died off back around 2000 or so.

Want some more SEO thoughts? Rand Fishkin over at SEOmoz has a top 10 list of SEO considerations from the deal.

(NOTE: See also our new What Site Owners, Web Developers & SEOs Should Know About The Yahoo Microsoft Deal story).

What about Yahoo Site Explorer!

Yeah, that’s awesome, right? Yahoo Site Explorer is a free tool that lets you see all the people linking to anyone. Neither Google or Microsoft offer anything similar (you can see links to your own sites but not to others). Yahoo could keep offering it if they want, since they can offer ANY search service they want built on top of Microsoft’s search technology. No idea yet if they’ll continue it, however. Stay tuned.

And this paid inclusion stuff?

You’re coming along really well! Paid inclusion is a little known way that lets you buy some of those “free” listings I talked about. You’re not guaranteed a ranking, but it can ensure you have more “tickets” — so to speak — in the lottery. I know, I know — it’s confusing. So confusing and controversial that Google never offered it and Microsoft dropped it several years ago.

Will it continue with Yahoo when Bing is powering things. Bartz told me during the press conference that a decision on this will be made later.

What happens to all the other search things at Yahoo, like news search. Or that Delicious thing!

We’ve gotten it clarified that “search” in this deal means web, image and video search. Yahoo will be using Microsoft’s technology for all of those things. Anything else not listed remains up to Yahoo to run with its own technology. That includes other Yahoo search services like the human-edited Yahoo Directory, the community-based Yahoo Answers site, the Delicious bookmarking site, the Flickr photo sharing site and so on.

But then again, things like Yahoo Local, Yahoo Shopping and Yahoo News all have some results that depend on “crawling” the web — the underlying technology that Yahoo is giving up and outsourcing from Microsoft. These services, as much as they depend on information gathered from across the web automatically by crawling, will now be backed by Bing.

Stay tuned. As the deal progresses, hopefully there will be more clarity. But also be prepared that much might not be decided until after the deal is done and during the transition period.

How much is Yahoo making by doing this deal with Microsoft?

All about the money, eh? This is really hard to determine right now.

Yahoo is guaranteed to receive payments for the first 18 months of the deal to match a “baseline” of what it was earning before the deal starts, we were told. How far back does the baseline go? We couldn’t get details on that.

BNET tries to make some estimates and comes up with a figure of around $700 million annually:

That could be a profit swing of $700 million annually. Given the company’s revenue in recent quarters, that could be roughly equivalent of adding a full 10 percent to the bottom line, which is major. Of course, that’s assuming that the $500 million number is actually additional.

An easier number to understand is that Yahoo will keep 88% of the search revenue generated off the sites it owns or operates. Microsoft gets the remaining 12%. TechFlash estimates this will earn Microsoft around $240 million per year.

So who won? Microsoft or Yahoo?

Officially, it’s all smiles that this is a long-term partnership where everyone wins. Said Bartz to the Seattle Times, in a longer interview with her and Ballmer that’s well worth reading (TechFlash has a nice post-conference interview with both, as well):

Listen, these things only work if both sides feel like they’ve won. And “won” means “fair.” What I really like about watching this unfold is, sure, it doesn’t mean there weren’t spirited discussions about it, but everybody is still smiling and joking, starting with Steve and I.

I think it’s no question that Microsoft got a huge bargain. Rather than paying billions to acquire Yahoo’s search technology and traffic, it’s paying nothing. The 12% share? That’s coming off of Yahoo’s earnings.

Seriously, neither Microsoft nor Yahoo uttered the billion figure in today’s press conference. Yet billions were being tossed around in all the previous deals that were being considered! To really understand what little Yahoo’s getting in this deal compared to a similar one last year, see our Microsoft-Yahoo Deals 2008 & 2009, Side-By-Side article.

Wasn’t there something about boats in all this?

Yeah. In May, Yahoo CEO Carol Bartz said she was willing to sell but only for “boatloads of cash.” Today, she said she’s going for “boatloads of value.” Thinking long term, you see.

What do investors think?

So far, they’ve been cold. Yahoo’s stock has dropped in price by 12% or $2. Some investors were expecting a large upfront payment. Last year, Microsoft would have paid out $1 billion to acquire Yahoo’s search technology. This year, it pays nothing. Microsoft was also going to buy $8 billion in Yahoo stock. This year, that’s not happening. Investors seem to want both boatloads of cash and value.

Need more? The Wall Street Journal has a summary of what some financial analysts think. TechFlash has one, too. Reactions are mixed.

Will there be layoffs?

Yes. Bartz said some Yahoo employees will move to Microsoft. Some will move to other jobs at Yahoo. And some, in departments not named, will lose their jobs.

At Microsoft, some layoffs might also happen, probably be on the direct sales side, I’d say. From an email Steve Ballmer sent to Microsoft employees, he hopes most workers will move to new jobs but not necessarily all:

Yahoo will assume responsibility for search advertising sales to certain premium customers on behalf of both companies. Given the huge opportunities in search and online advertising, we plan to redeploy most if not all affected employees into new high-priority functions.

Does all this really help competition in search as Yahoo and Microsoft say?

Oh, the blood that’s already been shed over that questions!

Last year, Microsoft lobbying helped quash the deal Google wanted to do with Yahoo, when the US Department Of Justice decided a mere partnership between Google and Yahoo would be anti-competitive.

The proposed Microsoft-Yahoo deal is more substantial than the Google one. Yahoo has to give up its search technology entirely. Google’s deal left this with Yahoo. There’s a case that this means the deal is removing a competitor from the space, which might not go over well with regulators.

There’s also a case that since the deal won’t generate a dominant share of the search market for Microsoft, it seems likely to go through. But then again, in the baby food world (seriously!), apparently the number two and three companies weren’t allowed to join up back in 2000. The Financial Times has a nice look at this.

Ad Age has a look at how Microsoft’s arguments against a Google-Yahoo deal might now be used against a Microsoft-Yahoo one. The Register also highlights Consumer Watchdog already objecting to the deal and US Senator Herb Kohl saying “careful scrutiny” is needed.

Is Google going to fight?

Expect it. Google’s already rattling the competition issue:

There has traditionally been a lot of competition online, and our experience is that competition brings about great things for users. We’re interested to learn more about the deal.

Ballmer at today’s press conference sees it differently:

Now, you know, obstacles, I don’t know, we think we have a good case on how this improves competition in the market. It’s good for consumers, the advertiser and the publisher. And obviously we’ll be called upon to present that case in D.C. and Brussels and other places. But it’s been looked at extensively by counsel both at Microsoft and at Yahoo!, and I don’t know if Brad Smith or Mike Callahan, the GCs, want to add on to that, the view of the regulatory.

And he expects that opposition to be lead by Google, though apparently he is unable to say Google’s actual name unless Walt Mossberg works magic upon his mind. He just kept saying “competition” today:

We’ll certainly face — we suspect we’ll face some opposition from the competitor [GOOGLE] — I would say competitors but it’s really the competitor who may not like more competition, because we actually think this is one of these cases where us coming together will actually provide more effective competition to the market leader, not less. So, certainly we would expect the competitor to be aggressive.

Can Yahoo succeed without search?

Told you I’d get back to this. Portals like AOL and Lycos that gave up their own search technology haven’t, and that’s worrisome. My A Search Eulogy For Yahoo post touches on this. Larry Dignan over at ZDNet has a nice article that goes into more depth on the comparison of what happened to AOL versus what could happen to Yahoo.

Of course, being focused might indeed help Yahoo as Bartz argues. As Quentin Hardy at Forbes puts it:

The stock may be falling Wednesday, but that doesn’t mean Bartz is unhappy. With a relatively swift move, she has defined, internally and to the world, what Yahoo! will be in the future. That’s more than we’ve seen from the company in years.

In particular, Yahoo has a number of leading web properties. It faces competition in some of these areas against both Microsoft and Google, but it has a good lead. Focusing on these might help. As Jared Newman at VentureBeat writes:

The blogosphere may guffaw at Yahoo’s abandonment of search, but maybe the company has a point about focusing more on its content portals. We all know display ads are in a rut right now, but that will change. And if Yahoo can innovate and figure out ways to make display ads more valuable to its clients, it’s already sitting on a goldmine of eyeballs. For a cash-starved company that, let’s face it, had very little chance of beating Google, dropping the dead weight of search isn’t a horrible idea.

Will this kill Google?

No. Google has a huge lead not just in marketshare but also in search technology over both Yahoo and Microsoft. This isn’t 1+1=2, beating the 1 of Google. The two together make it easier for advertisers to reach a common audience, but that’s the main benefit. Neither alone has a Google killer offering, and combined doesn’t just magically make that happen. For more background, see my State Of Search: Google Will Stay Strong Despite Bing & Yahoo article.

Gosh, I’d really like to read more about all this Microsoft Yahoo stuff!

Gosh, that feels like a planted question. But OK, here are other articles we’ve written today on the topic:

• 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
• Micro-Hoo Details: Q&A With Mehdi & Schneider
• A Search Eulogy For Yahoo
• What Site Owners, Web Developers & SEOs Should Know About The Yahoo Microsoft Deal

If you still need even more. head on over to Techmeme.

And then there were two.

Make no mistake, Yahoo’s out of the search game. I know the spin. Better user interface, new ways to innovate, a winning play. Let’s not kid ourselves. They’re done. Not today, not necessarily in a year, but down the line at some point. Done.

And it’s sad, because they were one of the originals. There was a time when the mighty Yahoo roared above all other search engines. When people were so worried about being listed in Yahoo that they pondered lawsuits over the issue, because not being in Yahoo was like not being on the internet at all.

Sound familiar? Yeah, Yahoo was the Google of its day. Funny to write that — it should be Google is the Yahoo of its day, but that’s how the tables turned in the search space.

Yahoo started out in search as a human-compiled directory. Editors, finding sites, writing short descriptions about them. It worked at first. When it didn’t, Yahoo had partners that “crawled” the web automatically to provide “backup” to its directory results. Open Text was its first partner. Later came AltaVista, then Inktomi, then eventually Google.

Ah, Google. It demonstrated that you could index millions (now billions) of pages AND have relevancy. Why use a card catalog-like human directory when you had a tool like Google that could read every page in every book in the library and pull back the matching pages?

Eventually, Yahoo decided it needed to own crawler technology. In 2003, it bought Inktomi and AllTheWeb. It also bought Overture, to have paid search technology and got AltaVista as part of the deal. All these things it needed to own, we were told, because search was so essential that you couldn’t outsource:

Given how important search is to our businesses, we really needed to control our own destiny in this space and not be dependent on any one third-party provider

That’s what I was told at the beginning of 2003 by Jeff Weiner, then senior vice president of search and marketplace at Yahoo. What’s changed since then? How did search go back to being a commodity to Yahoo?

Microsoft squeezed it. No blame to Microsoft. Yahoo was sitting there with leadership that couldn’t communicate clearly how it was a strong second-place player to Google. It seemed weak, ripe for the picking, and Microsoft went to pluck it last year. Google tried for Yahoo itself through a partnership deal. The US Department of Justice, like Amy Winehouse, sang “No, no, no.” Do that, and we’ll take anti-trust action against you, Google.

Microsoft never went away, though to its credit, it continued to improve its own search offering making it even more credible. Bing’s a long way from being proven. Perhaps it might never have succeeded. But it got buzz. Not only was it not embarrassing, it was impressive to some. Yahoo didn’t seem as necessary to Microsoft’s plans.

We’ll never know if Bing could have succeeded on its own. Or, maybe we will, if the proposed deal doesn’t go through. It’s still just a proposal, subject to investor and regulatory approval. But if it does go through, Microsoft becomes the number two search player. It controls the core search technology. Yahoo will have “parity” with Microsoft to use the search technology, we’re told. Soothing-sounding words, but parity doesn’t matter when Yahoo seemingly has given up on search as a top attraction overall.

Yahoo CEO Carol Bartz has made plenty of noise about how Yahoo isn’t just a search engine. Or not even a search engine, at times. How Yahoo has some of the web’s top destinations. That’s true, all true. But search was a leading property as well, for Yahoo. Yahoo wouldn’t consider outsourcing its email or IM services. Wouldn’t decide that its Yahoo Finance area could be powered by someone else. So why’s search got the boot?

Because Microsoft wants it, and they weren’t going away. Neither was Bartz standing up to definitively say that in the long term, it made more sense for Yahoo to keep search as a core technology. That few companies had such crown jewels. That technology alone a year ago worth $1 billion to Microsoft didn’t suddenly become worth no upfront payment a year later.

But also because Yahoo seems to have no choice. It keeps losing talent. It’s fine to have a great machine, but someone’s got to run it — keep developing it. So if I sound harsh about Yahoo getting out of search, I’m also understanding. It would have been incredibly difficult to keep it.

AOL and Lycos are two examples of portals that gave up their own search technologies and watched their traffic drop. Perhaps Yahoo will be the exception. Perhaps it will surprise me and be a long-time search player — a place where substantial amounts of searches happen. Part of me hopes it plays out that way, if only for nostalgic reasons.

But I doubt it.

For more coverage from Search Engine Land of today’s announced search deal between Microsoft and Yahoo, please see:

• 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
• Micro-Hoo Details: Q&A With Mehdi & Schneider
• The Microsoft-Yahoo Search Deal, In Simple Terms

We’ll also have more stories to come as we keep analyzing today’s news.

Postscript: I avoided reading most coverage since the announcement so that I could get some of my own thoughts out. Now I’m poking around. Jason Calacanis has an excellent Yahoo committed seppuku today post worth reading. We have similar views in general on today’s news.

Danny and I had an opportunity to talk with Microsoft SVP Yusuf Mehdi and Yahoo EVP Hilary Schneider earlier this morning. Both were instrumental in the deal and will be deeply involved going forward. They characterized the parties’ search integration as a long-term partnership, which implies ongoing cooperation and a high degree of collaboration.

We had a limited time to get a range of questions out but we were able to get a bit more clarity than we had from just the conference call and press release this morning.

Yahoo is going to be doing “premium search” sales. What is “premium search”?

Hilary Schneider explained that the bulk of growth in paid search spending over the next several years is going to come from “medium and larger” advertisers (think: Fortune 1000, brands). She said that “2/3 to 3/4 of all the spend” will be coming from larger advertisers. Yahoo will be the partner servicing and selling those categories of advertisers, which also feature “more complexity in their campaigns.” Smaller advertisers will deal directly with adCenter’s self-service platform. SEM firms using APIs will deal directly with Microsoft. Indeed, all search-related APIs will be supported by Microsoft.

Hilary said advertisers that had been pre-briefed were “thrilled” that they would be getting more scale via the deal. Yusuf Mehdi added that Microsoft and Yahoo would “go out jointly to the market to explain” how accounts will be handled going forward.

At the five year mark, Yahoo apparently has the unilateral option to alter the sales arrangement if it so chooses.

One outstanding question: Since Microsoft will have its own display advertisers — display is not part of the deal — presumably there will be some large/brand advertisers that have relationships with both Yahoo and Microsoft. It’s not clear how those situations will be handled. Who “owns” the relationship in such cases?

What does the agreement cover precisely?

The deal covers “web, image and video search.” Mehdi explained there will be a single crawl and a single index that both parties will have equal access to — “parity” in his words. He made the additional point that Google never provided full parity to partners and third parties using its index.

Yahoo has a broader option but is not required to use Microsoft in areas beyond those explicitly mentioned above — for example in Maps and Mobile. Hilary emphasized that Yahoo “remains committed to owning the user experience,” but could well use Microsoft search results more broadly than in just the web, image and video categories. It’s plausible that at some point Yahoo might simply adopt Virtual Earth as its own mapping platform (however I’m speculating entirely there).

Also note that if there is a single crawl and a single index, as Yusuf Mehdi explains, Yahoo will in fact need to use that index in other areas that do rely on a search crawl as opposed to structured data feeds from third parties.

What about BOSS and SearchMonkey?

Mehdi said that Microsoft will be taking them on (”the code and the responsibility”). Beyond this he suggested that Bing would be incorporating the best of Yahoo’s search assets and user experience into its platform and technology, including, for example, Search Monkey.

I then asked the follow-up question: If Bing incorporates the best of Yahoo Search and Yahoo is using the same index and has the same results as Bing, what will differentiate the two engines or sites in the future?

The answer was general: Yahoo will do UX innovation in mobile and on its various internet properties. The contention is that greater scale and a unified platform permits greater innovation for both parties “on top” of the core search index and technology. But it’s not clear how that will play out in a specific user-experience ways.

What happens with contextual advertising?

Medhi said that “We’ll build it and Yahoo will sell it.”

How will the deal affect Yahoo’s newspaper consortium?

Yahoo’s newspaper relationships have repeatedly been cited as strategic for the company. As might be expected Hilary Schneider said that this deal would make those partnerships better. The newspaper publishers have started to sell Yahoo search as well as display advertisering. She added they would now get greater reach through the combined platform and partnership.

What happens in 10 years?

The term of the announced deal is 10 years. What happens when it expires? Hilary Schneider said that she hoped that the partnership would be very successful and that it would be a “lifetime partnership.”

What do you say to the people who contend that this deal is a win for Microsoft and that Yahoo has given up in search?

They disagreed with that contention, as one would expect. In particular, Hilary Schneider emphasized that over the long term it would constitute “a winning play” for Yahoo because it would strengthen the company’s relationships with advertisers and provide a stronger platform. She added that she believed the deal would “accelerate innovation” and allow Yahoo to invest more aggressively in consumer experiences that are now the core focus of the company under CEO Carol Bartz.

There are still a number of unanswered questions, and some probably that the parties haven’t answered for themselves. We’ll have much more to say over the next several days on the topics touched upon here, as well as others.

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
• The Microsoft-Yahoo Search Deal, In Simple Terms

We’re about to do a call with Microsoft and Yahoo for more details about their proposed search deal. As part of that, I wanted to outline what we know so far and how that compares to the deal Microsoft made last year. At first glance, Microsoft is getting a huge bargain courtesy of the US Department Of Justice. Without Google being able to compete for Yahoo’s business, the billions that were floating around in 2008 become millions in 2009.

Note that we’ll be updating this chart throughout the day. For more background on the deal, also see our other articles today:

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