July 27, 2009
Yahoo is close to making a deal with Microsoft that will see Bing become it’s search provider.
Under the arrangement, Yahoo would outsource their search results to Bing, removing the need to maintain their own search infrastructure. Yahoo would also sell search ads on Bing.com as well as its own site.
Analysts have gone so far as to speculate that Yahoo! will be paid $3 billion upfront and will get 110% of the revenue that its searches provide after traffic acquisition costs in each of the first two years. In the third year, that figure would go to 90%.
The deal has apparently been on and off the table for months, with the most recent sticking point being whether Yahoo would be paid a lump sum up front for their search traffic. According to the Seattle Post, Microsoft never saw the up front payment as compensation for traffic, but as a share of revenue from the sale of search ads.
So if the Microhoo deal were to proceed, would advertisers buy ads via Yahoo Search Marketing or MS AdCenter or both? That’s still unclear, according to Ad Age:
“It’s not clear whether the search deal would have advertisers buying ads via Yahoo’s Panama or Microsoft’s AdCenter platform, but buyers would prefer the latter. AdCenter has more features than Panama, which has languished without investment for about a year, execs close to Yahoo told Ad Age. Many say AdCenter could be Google AdWords’ equal, but it needs more search volume, which a deal with Yahoo would help to provide.”
So why is the deal on the table again? In a word, Bing. Microsoft’s shiny new search toy received enough promotional budget to create the buzz needed to steal a little search market share away from Yahoo in the past few months.
In dinosaur terms, think of Bing as the plucky Triceratops and Yahoo as the far-reaching Brontosaurus that, (when combined together), become the aggressive Tyrannosaurus Rex needed to challenge the Gigantosaurus that is Google.
Estimates say that the Bing / Yahoo T-Rex may be able to grab up to 30 percent of search market share – more than enough to make Google a little edgy.