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Yahoo’s Google & Microsoft Deals, Side-By-Side

I was off most of Friday when the Google-Yahoo deal was announced — and then details of Microsoft’s last proposal to Yahoo also came out. Today was catch-up, and I wanted to put the deals next to each other in chart form. Google-Yahoo doesn’t seem as bad as some are making out. I may do a longer post on all […]

Danny Sullivan on June 16, 2008 at 6:41 am
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google-yahoo1-1920

I was off most of Friday when the Google-Yahoo deal was announced — and then details of Microsoft’s last proposal to Yahoo also came out. Today was catch-up, and I wanted to put the deals next to each other in chart form. Google-Yahoo doesn’t seem as bad as some are making out. I may do a longer post on all this later in the week. No doubt, Google got a sweet deal here. But I wouldn’t say Yahoo’s a chump at all. The
chart:

Feature
Google

Microsoft

Stock Purchase
Google might have shown Yahoo investors love by a
purchase, but that might also have triggered more anti-trust issues
Would have purchased $8 billion worth at $35 per share,
probably producing a short-term spike in value

Search
Assets
Yahoo maintains own paid & organic search services $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

Paid Search

Google powers some; Yahoo maintains its own service and
can partner with others. Smart move if Yahoo believes it really does
have long-term future in search
Microsoft powers all, presumably from blending Yahoo &
Microsoft systems

Organic Search
Yahoo powers all Microsoft powers all, presumably from blending Yahoo &
Microsoft technology

Contextual Ads
Google powers some Appears Yahoo would have continued keeping this;
Microsoft itself doesn’t have a substantial program

Domain / Direct Navigation Ads
Yahoo appears to continue selling its own ads in this
very lucrative space
Uncertain if Microsoft would have taken this over

Market
US & Canada & non-exclusive. This is important — Yahoo
could still partner with Microsoft elsewhere. Moreover, those valuing a
Yahoo-Microsoft deal to Yahoo-Google should remember that Yahoo
effectively has “more to sell”
Worldwide

Term
4 years initially; 3 year renewals optionally for total
of 10 years
At least 3 years

Guarantees
Yahoo guarantees Google can serve $83 million in ads each
quarter on Yahoo or can walk out in first 10 months — call it about
$100 million overall; Yahoo doesn’t have to send any set number of
queries to Google; Yahoo amazingly has no public revenue guarantees from
Google
In company memo, Microsoft said it would have guaranteed
Yahoo would earn more than it currently makes, for 3 years.

Poison Pill
Yahoo has to pay $250 million if there’s a “change of
control” that terminates the agreement in first two years; more
restricted terms applied to what “control” means if Microsoft gains
Yahoo shares
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

 


Financial Upside
According to Google & Yahoo, $250-$450 million per year
in extra income — up to $800 million annually; Microsoft & Yahoo could
still partner outside US
According to Microsoft, $1 billion per year in income
above current levels
Other
Upside
Yahoo maintains control of a powerful search brand, can
partner outside US; Yahoo & Google IM services to talk to each other
Yahoo would have no need to maintain engineering staff,
infrastructure and protect against brain drain

Downside
Anti-trust issues might not allow (but Microsoft-Yahoo
had issues, too)
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?

Anti-Trust
Yahoo & Google think it’s not an issue; already had
earlier test cleared; will wait 3 1/2 months for US Justice Department
review
Yahoo & Microsoft might have had issues in email & other
portal services; Microsoft expected to fight Yahoo-Google

Challenges
Yahoo brain drain;
who’s still running stuff?
Microsoft stays stalled in search; brains from Yahoo feel
like they’re still going to Google

Some references for the chart:

  • Why Yahoo Passed On Microsoft’s Search Deal (New Details!), Silicon Alley Insider
  • Yahoo, press release on deal
  • Google, blog post on deal
  • Memo From Microsoft’s Kevin Johnson, Wall Street Journal
  • Google’s $83 Million Escape Clause: SEC Filing Spells Out Details Of Yahoo-Google Deal, TechCrunch
  • Google’s Yahoo Rebound Play, BusinessWeek
  • Google-Yahoo: Senate Antitrust’s First Reaction: Plan To Investigate Closely, PaidContent.org
  • Search Biz: Yahoo-Microsoft Talks Over! Google CEO Downplays iPhone Conflict, Says Google Has No “Evilmeter,” & The Argument Against MSFT CEO Steve Ballmer, Search Engine Land
  • As Expected, Yahoo Announces “10 Year” Google Paid Search Deal, Search Engine Land
  • Microsoft & Yahoo Merger, Search Engine Land: This is an archive of all our past stories, including some that go into great detail on why Yahoo-Microsoft wasn’t a foregone winner, even if it happened (Leaving Las Yahoo: Microsoft’s $5 Billion Mistake?,
    MSFT + YHOO: What Would Microsoft Yahoo Look Like?)


About The Author

Danny Sullivan
Danny Sullivan was a journalist and analyst who covered the digital and search marketing space from 1996 through 2017. He was also a cofounder of Third Door Media, which publishes Search Engine Land, Marketing Land, MarTech Today and produces the SMX: Search Marketing Expo and MarTech events. He retired from journalism and Third Door Media in June 2017. You can learn more about him on his personal site & blog He can also be found on Facebook and Twitter.

Related Topics

Channel: IndustryGoogle & Yahoo Search DealGoogle: Business IssuesGoogle: PartnershipsMicrosoft & Yahoo Search DealMicrosoft: Business IssuesMicrosoft: PartnershipsYahoo: Business IssuesYahoo: Partnerships

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