Yahoo gives up search engine business. Sells to Microsoft

yahoosells

Yahoo! CEO Carol Bartz (left) and Microsoft CEO Steve Ballmer (right) signs the deal with a giant pen

This is one of those news that already happened before I even put my blog up but its interesting enough that I wanted to post it out there for those that haven’t heard yet.  Yes folks, Yahoo! has officially sold their search engine business to Microsoft.

So what does this really mean?

What this really means is that Yahoo! will still have a search function on their site. What just happens when you search something is that it will be Microsoft’s technology working its magic and not Yahoo!’s. The site will be powered by Microsoft’s own search engine–Bing. If you search on Bing and on Yahoo!, you will get the same results. Yahoo’s will just have a “powered by Bing”.

So where will be the future of Yahoo! and Microsoft on this matter?

Yahoo will concentrate on it being a portal and being the site everyone wants to go to for all the other services like mail, groups, special interests. It just needs to have a search function but does not want to handle that side of the business anymore.

Microsoft will be focusing on promoting Bing and its ad-serving technologies to compete with Google. Having this deal adds value to advertising on Bing as it gets both customers searching on Bing and Yahoo!

Why did they do this?

From Yahoo!’s point of view, they feel that people go to their site to do other things like check email, horoscopes, rather than the search engine as a primary purpose. As such, by selling it, Yahoo! CEO Carol Bartz feel that the deal enables them to have a healthy revenue stream to invest on critical areas to their future while Microsoft can focus on search.

From Microsoft’s point of view, they wanted to have a stronger competitive platform to compete with Google. By buying Yahoo! they would now have an estimated 30% of the market compared to Google’s 70%. This gives them a much better footing.

How much did it cost?

Nothing. Nada. Zilch. Zero. What happens is that Microsoft will be paying Yahoo! 88% of the ad revenues coming from ads on Yahoo! for the next 5 years. Microsoft further guarantees Yahoo that it will earn equal or more than it currently does for the next one and a half years. Not a bad deal considering Microsoft originally wanted to buy it for $45 billion back in 2008. Today, it doesn’t have to pay anything outright and as they pay Yahoo! with revenue generated from Yahoo’s own site.

And oh, Microsoft gets exclusive rights for 10 years to Yahoo!’s search engine technology. After that its pretty much unclear. But given it has Bing, its really just to be sure Microsoft will have control.

So when is this going to happen?

The deal has already been confirmed and is expected to complete by early 2010. There is still alot of paperwork and signatures to get in order. The implementation is expected to take another 3-6 months so we should be seeing Yahoo search powered by Microsoft in mid 2010. The ads listings will take another 2 years so everything fully integrated should be by year 2012. Just right on time for the end of the world according to the Mayan calendar predictions.

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One thought on “Yahoo gives up search engine business. Sells to Microsoft

  1. Pingback: Yahoo Gives In to Microsoft, Gives Up on Search

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