Yahoo! And Microsoft Search Alliance


As of February 18, 2010, Yahoo! and Microsoft were given regulatory clearance from the U.S. Department of Justice and the European Commission to make their new Search Alliance a reality.  This agreement has been in the works for a while now, and the official announcement was made last July regarding the proposed contract.  Now, both Microsoft and Yahoo! claim many of the deals’ features can begin to be implemented within days.

The most important aspect of this merger is that Microsoft will gain management of the technology platforms for both natural search and paid search.  Microsoft will also support self-service advertisers and Microsoft AdCenter will become the single platform for paid search.  Yahoo! will be responsible for supporting high-volume advertisers, SEO and SEM agencies, as well as resellers and their clients, and will focus its energy on adding rich content and enhanced listings while Microsoft focuses on providing the most relevant algorithmic data to the search platform.  Both companies will each maintain their own display advertising, email, instant messaging, sales force, and other proprietary features.

As part of the arrangement, Microsoft will also get a 10-year license to certain Yahoo! technologies, and in return, Yahoo! will be given 88% of search revenue generated for the first 5 years of the deal to compensate for traffic Microsoft receives from Yahoo!’s sites.

Although the two companies claim there will be no immediate effects, transitional details can begin shortly.  Both Yahoo! and Microsoft aim to complete the transition of algorithmic search in the U.S. and Europe by the end of 2010 but may extend that timeline out to 2011 if needed.  Full implementation of the agreement is expected to be implemented within 24 months of regulatory clearance.  For now, the Search Alliance has been approved for the U.S. and European markets, but negotiations are in the works to extend the Alliance to Asia, Latin America, Australia, and Canada in the future.

According to Yahoo!, this merger is expected to add $500 million in yearly operating income and $275 million in cash flow, while reducing capital costs by $200 million.  In addition, Yahoo! claims it will add 62% more search volume and 150 million more searchers than on Yahoo! alone.

For agencies or companies represented by agencies, support and continuity will still come from Yahoo!’s sales team, which will be most effective in helping businesses navigate through the upcoming changes and best succeed in the new unified search marketplace.  Both Yahoo! and Microsoft expect the Search Alliance to benefit advertisers, consumers, and publishers alike, but during the transition phase, it will be good to know assistance is still a phone call away.

Contributed by Amanda Finch, VP Operations