Yahoo and Google have confirmed that they are indeed entering into a partnership around search advertising, a story we broke earlier today. Google’s blog post on the agreement is here.
—The deal is non-exclusive. Yahoo will be able to run Google ads alongside Yahoo ads or other ad providers.
—The deal is expected to add $800 million a year in revenues and $250 million to $450 million in operating cash flow.
—The deal only applies to paid search and contextual ads, not to algorithmic search.
This arrangement will no doubt intensify the scrutiny from Washington, where the Justice Department has already launched an investigation into antitrust issues arising from Yahoo and Google merely testing the waters for today’s partnership. Congress might want to hold hearings as well. Back in April, Citi analyst Mark Mahaney estimated that a Google deal could increase Yahoo’s cash flows by more than $1 billion a year. It turns it will be less than that. But given the antitrust scrutiny, the deal is necessarily structured in a creative way. As part of the deal, Yahoo can decide to go with Google only for those search queries where it will get the most bang for the buck.
On Wednesday, when asked by Fox News about the antitrust issues surrounding a possible search deal with Yahoo, Schmidt responded:
Well you are presuming that there’s an issue there.
If there were an issue, it’s perfectly possible that you can do commercial deals that look like outsourcing deals which are not exclusive and where industry structures allow everybody to win. If you look in the automobile industry and lots and lots of industries like that, you have suppliers who supply other people. So if there were a deal, it would be based on those sorts of principles.
As long as the relationship is competitive, it might pass regulatory scrutiny. That is, if Microsoft can bid for Yahoo’s search advertising business as well, then whoever can deliver the most cash to Yahoo will win the business. In reality, we all know who that will be: Google. Neither Microsoft nor Yahoo can match the search dollars that Google can deliver.
It’s amazing to remember that once Jerry rejected Page and Brin’s search technology (before Google was started). Now, Google is rescuing Yahoo!
Welp!
search.yahoo.com is down!
search.yahoo.com is still working!
Windfall of Terry Semel destruction of such a leading internet company!
For me search.yahoo.com it still works..this is strange….
Evidently as part of this deal Yahoo and Google have agreed to make Yahoo Messenger and Google Talk interoperable.
http://yhoo.client.shareholder.....eID=316450
It’s a shame that Yahoo has to resort to this just to try and thwart Microsoft. Jerry and his crew have to go.
Pride goeth before a fall….
So in order to “save” itself, Yahoo is resorting to leasing it’s most profitable parts to a direct competitor… what kind of a plan is this? If this is all they have to offer, they made a HUGE mistake by letting the Microsoft deal fall apart.
Jon
http://woodmarvels.com - Create Unique Memories
If you’ve been putting off your Internet idea, now is the time.
A desperate Yahoo & MSoft can only be a good thing.
I wonder how many Yahooligans are going to get laid off to free up this “operating cash flow.”
Not cool for them to mess with the industry like this. Yahoo/MS should have been an evolutionary next step for technology, but instead a few have slammed the valley into stale, boring, 1 team town.
http://www.reuters.com/article.....612?rpc=44
@6, well thats cool, now AIM, YM, can be seen on my Gmail, so no need for my YahooIM client.
Does that mean that the cpc min bids for Yahoo! Search Marketing will increase when competing against Google bids for the same Sponsored Search space? It will be interesting to watch.
Good job Ballmer, you’ve made Google stronger!
It’s great to see another chapter of Yahoo incompetence come to an end. You have to wonder how much longer these clowns can hold onto their jobs. Let’s see how much Wall Street decides to reward a company that increases its revenue by outsourcing key parts of its business to its greatest competitor.
By these actions, Yahoo is doing more to advertise the superiority of Google than Google ever could.
What does anyone think the Microsoft/Yahoo deal would have produced? You can’t just add two companies together and get “Big Successful Company X2″. Their services overlap, their technologies are wildly incompatible and their cultures don’t mix. Within 1 year any Yahoo staff that mattered would be gone, any useful property owned by Yahoo would be hopelessly screwed up and all you’d have is a messier, slightly more valuable Microsoft and an even bigger Google. To even pretend that the deal would benefit Yahoo employees in any way is to gleefully piss in the face of reason… Shareholders, they’d get a quick bonus and be done.
I couldn’t agree with y’all more! Jerry and the boys are stifling innovation in the valley by kowtowing to the google monoculture. As mike said in one of his vintage posts to this blog, the valley needs a downturn desperately! May yagoogle go down with it! Please take facebook too while we’re at it!
The reason that neither Microsoft nor Yahoo could match the search dollars that Google can generate is that Google has a natural monopoly. That natural monopoly might have been challenged by a Yahoo!/Microsoft combination and led to a competitive search duopoly, but it certainly won’t now.
@TomVonS - agreed.
Here is a comment I wrote over on SAI today:
“I am pretty much loving this.
Yahoo, if they play this wisely, just pushed MSFT permanently out of the picture (unless they come back with an ungodly offer of say $40/share). Here’s why:
1) Yahoo can now show increased near-term revenue to the shareholders, which is all they (foolishly) care about. YHOO closed at $23.50 which was well before the conf. call, I would expect the stock to mildly rebound, say to $25 tomorrow.
2) They have extra money to innovate, and hopefully the recent scare has gotten everybody inside Yahoo on board with becoming a hungrier, grittier competitor again. Nothing like crisis will galvanize the mind…
3) Those that were overly eager to be sold to MSFT should be shown the door. Get the dead weight out of there.
4) Google looks excellent in all of this, they can be magnanimous, make extra $ on Yahoo’s eye-balls (which is what MSFT wanted but in reality couldn’t have delivered on!),and the Google/Yahoo IM cooperation agreement is HUGE.
5) MSFT is left holding the bag in a big way. Did they really just waste 4 months to get to this outcome?!?
In their haste to try and bully Yahoo, they essentially drove it into the arms if their arch enemy. From a machiavellian co. such as MSFT, this is a decidedly non-shrewd move…
Though I would expect announcement of a different deal soon, maybe Facebook, maybe multiple other smaller companies. MSFT has more cash than sense what to do with it profitably/innovatively.
Will it spend like a drunken sailor?
6) The tenacity with which Jerry and Co. have defended against this deal proves how much MSFT’s reputation as a bully and (when it comes to the internet) its cluelessness have made it so that anyone who can avoid doing so would rather not deal with them. Maybe their balance sheet under “good will” should show a large negative number in the tens of billions of dollars.
7) Yahoo’s stock was $19-20 before the unsolicited offer, so even after all of this, they are still $3-4 in the black. Like I said, the stock may well be at $25 tomorrow. Thx MSFT.
It’s actually Yahoo that has really refurbished and refocused its strategies in the last few months, while MSFT apparently still hasn’t figured out what it really wants to do.”
Cheers!
The only winner here is google.
I hope MS bids 15/share for yahoo
MS will buy yahoo for around 25$ a share within the next few years. I said it here first. MS will use those billions to gain MS from Yahoo, so Yahoo will continue to lose market share to both Google and Yahoo, this deal might get it short term cash but its doomed, especially with someone like Jerry at the helm.
yahoo is a goner
yahoo is a goner
yahoo is a goner
yahoo is a goner
yahoo is a goner
Anyone hoping for the MS deal to rescue Yahoo and open up viable competition to Google is clueless. It merely would have resulted in an exodus of Yahoo employees, MS gutting the company for its ads/search, and shutting down almost everything else. MS as a company does not understand internet culture, Yahoo does. There is zero chance for MS to be an effective competitor to Google anymore than AOL unless they change their culture.
Jerry Yang just added another page to our MBA textbook. Thanks.
A great day to party.
@24 Under the chapter on “cutting off your nose to spite your face”.
@Alex Schleber
I couldn’t disagree more.
1) Temporary bump. It’ll drop to less than 20 within a month.
2) Hahaha. This is funny on so many levels. Unlike Google, where you can see the stuff come together, Yahoo just throws stuff on the wall. There’s little if any functional integration.
3) Why? They were being good stewards of their corporate responsibility.
4) Google can only get so big, right? This deal is like Yahoo signing up for Adsense. Just a really big Adsense client.
5) This one you have a point on. Microsoft is stymied in the near term, but it puts them in a place hardly anyone would have thought. They are now the ones looking at a monopoly.
6) You call it defending. I’d call it flailing. Yahoo’s management decided against the deal on a personal level not a fidicuary one. This is where they will get nailed.
7) $15 in 30 days. They have no future by themselves.
Good Grief. Yahoo is gonzos. Thanks dipshit.
Unbelievable….figures that yahoo would do something like that.
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Good to have known you, Yahoo.
To all you Yahoo supporters. The only important issue here is whether the Microsoft deal would have maximized Yahoo shareholder value. Yahoo has a responsibility to its shareholders first. If someone offers Yahoo $100/share, but the acquiring company plans on liquidating Yahoo, the Yahoo leadership is obligated to take the deal. The #1 responsibility of American public companies to maximize shareholder wealth, not protect its employees from change, and not provide people with another option in search engine. We will see if Yahoo benefits from its recent business development deals. I suspect that the market will punish Yahoo’s stock, as it removes any premium that was left in speculating a MSFT deal. The conspiracy theorist in me wonders if Microsoft is waiting for a shareholder lawsuit to do further damage to the company, and thus leave it for the taking at a much cheaper price.
Before this day, if your site was rejected for any reason by adsense you could still use overture and get a bit less money (i mean context ads relevant to search). I was really hoping msft would buy yahoo and there will be some healthy competition against google (:
Actually yahoo’s biggest mistake was to use google’s search. After yahoo implemented this “powered by google” thing media coverage on google just tripled. I don’t know how much Jerry Yang “likes google”, but he really should have loved msft instead and partner with it on selling search ads.
The day that Yahoo died…
Nice to see that everyone is still so obsessed with Jerry’s mistakes and the dating game of M&A
This will keep folks from understanding that Google is no different than MSFT or any other large powerful player
Wouldn’t you rather have some of those $$$ to help your small ideas flurish
At Google, or any humongous monopolizing business….power corrupts
Absolute Power Corrupts Absolutely…..
Y! will continue to surprise the world, like this… no?
First step forward in the right direction… Good for the Web!
Glad to see you didn’t “rawhoo”-ize a mock logo for the new partnership like pesky VW did.
Harry “feels a tad bit better” Wang
Tough to buy traffic from Google so I was starting to buy traffic from Yahoo. Now more of that Yahoo ad space will be full of Google advertisers.
Let me get this straight. Google has a reported 60% or more monopolistic share of the search market, they restrict or ban any content publisher that sells paid links, restricting developers from using paypal was just a “honest mistake”, they will soon have two major ad networks of their own in adsense and doubleclick, and they will have an advertising agreement with Yahoo.
Government regulation anyone? Trusting Google not to be evil of their own accord does not seem like it is in the public’s best interest anymore.
Die Microsoft Die…Hail Google!
FOR MICROSOFT :
Check out what your consumers think :
http://www.brandtags.net/browselt.php?id=127
Google has 60% of market (and losing big in markets like China) and you’re calling for the government to bust them up with no evidence of evilness, in stark contrast to MS which had well over 90% of the *worldwide* market sewn up, and got caught red handed many times over trying to illegally disadvantage competitors.
At every step, Google has shown themselves far more benign than MS. You idiots want to hand Yahoo to MS, who owns the software built into every freaking PC sans Apple, a company with stranglehold on the very client devices that the majority of people use to access the web, a company invading living rooms through the xbox, mobile devices, everywhere, a company with tens of billions in cash sitting in the bank, and hydra-like tentacles into virtually every business workplace in the world. A company that demonstrably set out to sabotage competitors and sabotage open standards groups.
If anything, the Google “monopoly” on search, along with Linux on the server, are practically the only two areas left that Microsoft has not dominated.
Do we really need to ask the government to help them out?
To read the announcement from Google, you would think this was no big deal.
The thing is - these guys are (were) arch rivals.
I have heard people claim that this is the next step in the development of ‘the Google internet’. Is there something for us to worry about here?
Jim Connolly
The Tech News Blog
Yahoo just surrendered. In the long run, it is a disaster for Yahoo and a step backwards for anyone who is advertising on the Internet. There is no other way to look at it.
How do they think the negotations with Google are going to go in another couple of year’s when Yahoo has completely ditched its own advertising technology and has no other options?
Terry Semel destroyed most of Yahoo’s value now Yang is finishing the job for him. In two years time Yahoo will be utterly irrelevant and we’ll wonder why we didn’t stop talking about them earlier.
From Yahoo’s press release
“The agreement will enhance Yahoo!’s ability to achieve its goal to grow operating cash flow significantly, while at the same time providing flexibility to continue to invest in ongoing initiatives such as algorithmic search innovation and search and display advertising platforms. It gives Yahoo! complete flexibility to continue to use its Panama paid search results.”
Translated = Panama is dead. 5 years of development initiative a failure. Google also clearly doesn’t believe Yahoo will make a jot of progress on their algorithmic search otherwise they wouldn’t provide them with this inflow of cash.
A new hybrid name:
Yahoogle
Google and Yahoo agreed to enable interoperability between their instant messaging services making easier to communicate between users. I hope this may happen soon,Great going…
-Deepa (dooyt.com)
@ Ryan (#31): Agree that a board’s responsibility is to represent the company’s owners - its shareholders - and make a decision on the MS deal based on whether they think the value had been maximised.
But I don’t think the answer here was that clear-cut - would the shareholders want to cash in immediately for $33/share (was that the exact figure, can’t remember), or would it provide better long-term value for shareholders for Yahoo to remain independent to develop itself strategically? You made the assumption that cashing in provided the best value; while Jerry Yang (being a founder in Yahoo) understandably disagrees because as a founder he’s likely to be more hopeful in Yahoo’s strategic initiatives.
I might argue by the very fact that the shareholders installed Jerry Yang as CEO, they already placed a bias towards strategic development. If they wanted to cash in, they would have installed someone else as CEO (perhaps someone like Carl Icahn!!)
Allow me to be the first to coin the term “Yahoogle”
A great day to party.