Organic and Paid Search Just Became a Two Horse Race
As previously announced on this blog, the much speculated deal between Microsoft and Yahoo! has finally been announced. Yahoo! has finally given up on search and Microsoft is now firmly in control of much more visitor data than they ever have before.
A quick summary of the deal announced Wednesday July 29th 2009:
- The deal has a 10 year term.
- Yahoo! has agreed to use Microsoft search technology and paid search on the Yahoo! platform.
- Microsoft will pay Yahoo! an 88% commission on all revenues received on Yahoo! for the first 5 years.
- Yahoo! will maintain control of sales for advertising on Yahoo! and some portions of Microsoft.
What Are The Benefits? – The Real Skinny
In layman’s terms here are the key things that you really need to know about this deal:
Benefits For Yahoo!
- Yahoo! maintains control over the sales of advertising on their own properties but are now using Microsoft’s search technology in every way.
- Yahoo! is saving about $200 million dollars in research and development. Money they no longer need to spend on their own search technology.
- Yahoo! will receive 88% of all revenue from search done on their own properties for the first 5 years. So shareholders will be very happy about retaining virtually all revenue.
- Yahoo! no longer has to support its own search software
Benefits For Microsoft
- Microsoft will now retain all visitor information.
- Microsoft will now have far greater market share. A greater backbone in developing both the Bing search product and Microsoft AdCenter platform.
- All paid seach will now be managed through Microsoft AdCenter.
Watch Video of Both Microsoft and Yahoo! CEO’s Talking About The Deal
Yahoo! CEO Carol Bartz
Microsoft CEO Steve Ballmer
Cutting To The Chase
Both sides are getting exactly what they need. Yahoo! will actually receive an increase in revenue and will retain perceived control over the sales process. Shareholders of the company will be happy about this.
Microsoft wants control over market share at this point so that they can support the continued technology improvements of both Bing and paid search component – AdCenter.
Paid search advocate at TechWyse, Matthew Hogan is happy with Microsoft taking control of paid search. “Yahoo! has put very little research and development into the paid search interface (dubbed Panama) since its release. Microsoft AdCenter has been showing continued improvement since its initial release and has many improvements over even Google Adwords interface. I expect this news to ensure the continued improvement of the paid search landscape and also for the first time – a legitimate player to faceoff against Google.”
While it may appear that Yahoo! increases revenue, the real value here long term is that Yahoo! has stapled any threat of Microsoft taking greater market share and Microsoft is now assured long term market share and vast samples of data to improve the overall search experience. Microsoft can begin trying to put itself on equal ground with Google.
Microsoft now has access depending on who you talk to of about 15%-30% of the market. They have quite a ways to go. But this is the biggest step Microsoft has ever taken in competing with Google.
Let the games begin.