Microsoft-Yahoo Deal Struck–Will Be Announced Within Next 24 Hours
Multiple sources close to the situation said that the online search and advertising deal between Microsoft and Yahoo has been struck and will be announced within the next 24 hours.
While it is not clear if the actual papers have been inked or approved by the boards of the two companies, sources said it was a formality and that negotiations are complete on a deal that is less sweeping than originally conceived.
In any case, making any partnership is likely to be the cause of much relief at both companies, since they have been trying–without success–to join together to mount a better offense in the sector against the dominant Google (GOOG).
According to sources, as had been previously reported by Advertising Age, there will be no upfront payment to Yahoo, with the focus on a revenue share between the two companies.
Sources said Microsoft search technology will be used on Yahoo sites, although it is not clear if it will be branded as “powered by Bing”–Microsoft’s handsome and innovative new search offering–or not.
In addition, sources said Yahoo would still sell search ads on its sites and on Bing too, although Microsoft’s AdCenter advertising sales technology will be underneath it.
This makes the deal much smaller than ones previously envisioned, which included Microsoft taking over both Yahoo’s search and its text-based search advertising businesses in exchange for large payments and guaranteed revenue.
Previous discussions also considered Yahoo selling display advertising for Microsoft’s MSN consumer sites.
Doing its own search ads means the cost savings to Yahoo will be less than previously estimated, but it also solves its longstanding issues about control of relationships with advertisers and also of consumer data.
Still, once in place, it is a significant deal in the Internet arena, bringing together two of its most powerful players in an unusual alliance that has been long in coming.
“After three years of trying, it looks like it finally stuck,” joked one person familiar with the situation about the Silicon Valley icon and the Redmond, Wash., software behemoth finally joining together.
And, in fact, Yahoo (YHOO) and Microsoft (MSFT) have been engaged in talks about a variety of partnerships over the years, as well as in a hostile takeover struggle that soured their relationship badly.
But, under new Yahoo CEO Carol Bartz, the companies have re-engaged in recent months, discussing a deal to share search and online advertising technology.
A spokesman for Microsoft declined to comment, as did a spokeswoman for Yahoo (even though BoomTown asked: “Pretty please?”)
Both posts noted that Yahoo and Microsoft were concerned about regulatory approval, although with Google’s share at close to 70 percent in the search market, it would be hard to argue that their union hinders competition.
Together, Yahoo and Microsoft’s share is about 30 percent.
A search and advertising partnership between Yahoo and Google failed to gain regulatory approval last year–and thank goodness for that!
Yahoo and Microsoft will likely try to paint this one as a counter to Google’s power and hope such an argument will be supported by advertisers, who have long wanted a stronger second-place competitor to Google.