Yahoo’s Google & Microsoft Deals, Side-By-Side
Danny Sullivan on June 16, 2008 at 6:41 am
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 | 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 |
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?)
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