Microsoft-Yahoo Deals 2008 & 2009, Side-By-Side

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:

    Feature 2008 2009
    Stock Purchase Would have purchased $8 billion worth at $35 per share, probably producing a short-term spike in value Microsoft’s buying no stock
    Search Assets $1 billion to acquire paid and organic search. Yahoo would have been out as a search player. Right now, it’s second place with Microsoft third and yet to gain on Yahoo Microsoft’s paying nothing for the assets
    Paid Search Microsoft powers all, presumably from blending Yahoo & Microsoft systems Microsoft is handling all self-serve sales; Yahoo sells to undefined “premium” advertisers for undefined period of time. Appears that advertisers of both types may have to buy ads at both Yahoo and Microsoft. Boosts Microsoft share if so. Microsoft hindered with direct relationship with key clients
    Organic Search Microsoft powers all, presumably from blending Yahoo & Microsoft technology Microsoft powers all web search; uncertain what happens with things like news search, maps, Delicious, Yahoo Directory. Uncertain what happens to Yahoo BOSS (probably goes away)
    Contextual Ads Appears Yahoo would have continued keeping this; Microsoft itself doesn’t have a substantial program Appears Yahoo may keep this
    Domain / Direct Navigation Ads Uncertain if Microsoft would have taken this over Appears Yahoo may keep this
    Market Worldwide Worldwide (though uncertain about joint venture in Japan)
    Term At least 3 years Yahoo gives up its search technology for 10 years; uncertain if it can use it again after that [and wouldn't be that useful anyway]Microsoft pays Yahoo 88% of sales of search ads on Yahoo’s own sites [if I understand right] for 5 years

    Microsoft guarantees revenue per search in each country for 1 1/2 years — what that revenue is hasn’t been clearly outlined.

    Guarantees In company memo, Microsoft said it would have guaranteed Yahoo would earn more than it currently makes, for 3 years. Seems that Microsoft will now guarantee revenues for 1 1/2 years.
    Poison Pill If Microsoft did take over Yahoo, after 10 months, it could continue the agreement with no guarantees to Google and still avoid poison pill payment Nothing specific outlined
    Financial Upside According to Microsoft, $1 billion per year in income above current levels Yahoo says it will boost income by $500 million [per year, one time? not said] and save $200 million in capital expenditures [one time expense?] and boost cash flow annually by $275
    Other Upside Yahoo would have no need to maintain engineering staff, infrastructure and protect against brain drain Yahoo maintains control of a powerful search brand
    Downside Microsoft would compete with Yahoo in display area, yet Microsoft has strongly suggested search+display is a winning combination – so Yahoo would lose a key component other than “data” that would be given to them; search was main value (to me) of earlier deal at $40 billion, now only worth $9 billion? Yahoo thought it has to own search tech back in 2004 to be successful as a search engine and a portal. So did Microsoft. Now Yahoo betting it won’t become like AOL
    Anti-Trust Yahoo & Microsoft might have had issues in email & other portal services; Microsoft expected to fight Yahoo-Google Probably not an issue but expect Google to lob challenges
    Challenges Microsoft stays stalled in search; brains from Yahoo feel like they’re still going to Google Up to 24 months leaves Yahoo’s future further in doubt while Microsoft continues pushing Bing

    Related Topics: Channel: Industry | Microsoft & Yahoo Search Deal | Top News


    About The Author: is a Founding Editor of Search Engine Land. He’s a widely cited authority on search engines and search marketing issues who has covered the space since 1996. Danny also serves as Chief Content Officer for Third Door Media, which publishes Search Engine Land and produces the SMX: Search Marketing Expo conference series. He has a personal blog called Daggle (and keeps his disclosures page there). He can be found on Facebook, Google + and microblogs on Twitter as @dannysullivan.

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    • nickstamoulis

      This is a great analysis, to me it seems that the 2008 deal might have made Yahoo! more money and would have been better for advertisers…we shall see!

    • Duane Forrester

      I think you managed to single-handedly cut through all the chatter on this topic over the past year + >> excellent summary Danny – thanks. :)

    • markvozzo

      Thanks Danny for this side-by-side. It’s going to be very interesting to see how things evolve in the Australian digital media landscape as there are Joint Ventures on both sides; Microsoft + PBL (NineMSN) and Yahoo + Seven Network (Yahoo!7) which are both competing for audience share. I wonder what will be the knock on affects from this. Maybe other markets face similar issues.

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