Today, Yahoo died as a search engine. If the deal with Microsoft is approved, what will replace it will be Bing, the search engine that Microsoft launched only two months ago. Within a few months time, Microsoft will go from owning 8 percent of the U.S. search market to 28 percent (comScore). That is still less than half of Google’s 65 percent, but it could give Microsoft a fighting chance in the search wars against Google.
While the agreement was a long time coming, Bing was the cherry on top, so to speak. Earlier today, I spoke with the two executives who oversaw the negotiations for both sides, Yahoo EVP Hillary Schneider and Microsoft SVP Yusuf Mehdi. I asked how big an impact Bing’s sudden success had on bringing the deal to a close. “Seeing Bing as a live experience was a nice assurance,” says Schneider, “but did not change our rationale or timing. This was a conversation that went on over several months. Bing was introduced after we had material momentum in how we wanted to approach this partnership.”
Yet Bing was able to gain market share in its very first month, and it took it from Yahoo, not Google. And Bing is just going to get better. Yahoo faced the very real prospect of market share erosion from below as well as from above. Now in one fell swoop, Microsoft will control all of Yahoo’s search volume. In a conference call today, Steve Ballmer explained how important market share is in search:
Do we think we will have better algorithms for relevance? Yes we do. There is a feedback loop in search. the more searches you serve, the more you learn about what people click on. Scale drives knowledge. There is a return to scale from seeing that much activity [that is more] than Yahoo or MSFT see independently
Microsoft will measure the success of this deal in two ways: increased market share with advertisers and increased market share with consumers. When I asked Mehdi what success would look like a couple years out, he defines it in terms of “shares of queries and spends.” Even before mentioning gaining share with consumers, he says: “Success is a smooth transition for advertisers as they shift more share of wallet from traditional media and competitors to get the better ROI.”
Microsoft will also become the new home for Yahoo’s search technologies. That is a good thing because even before this deal was announced, the spirit of technology innovation at Yahoo which produced projects such as Yahoo Boss and Search Monkey seems to have fizzled. These efforts will now be passed on to Microsoft. The fortunate news is that Mehdi says he wants to keep those projects alive. “For Search Monkey and Boss, we will integrate that technology and determine how to take that forward. There is a lot of goodness there.” At least Microsoft knows a good developer platform when it sees one.
So the deal is good for Microsoft. It puts them in the game, and they didn’t even have to pay $1 billion upfront. But is it good for Yahoo?
Instead of that upfront payment, Yahoo is getting 88 percent of search advertising revenues on Yahoo-owned sites every year for the next five years (at which point the so-called TAC rate will be renegotiated for the last five years of the deal). “This is a materially higher TAC than any of the previous arrangements,” says Schneider. But it’s also not much higher than what big affiliates like AOL are believed to be getting from Google today. And Yahoo needs to keep paying its sales force, but can only keep 88 percent of the revenues they generate. (Although there are some revenue-per-search guarantees baked into the deal to protect Yahoo on the downside).
Investors aren’t thrilled with the deal, and it is not just because they tend to value cash over potential. This is a ten-year arrangement between two lumbering giants that is filled with execution risk. It is a very complicated deal. Yahoo’s sales team has enough trouble communicating with its own engineers. Now they have to learn how to talk to Microsoft’s.
Jason Calacanis argues that Yahoo just committed suicide, while Bill Gurley thinks the opposite, that Yahoo had to get out of Google’s way to survive.
The two companies will work hard to pull this off. Their futures depend on it. And the deal is structured in a way that makes sure both sides make more money the more searches and advertising dollars Bing generates. Getting to that ideal state, though, won’t be easy. In the meantime, as they work through all of the implementation issues, Google could strengthen its position and take even more share.
No matter what happens, Yahoo just took itself out of the search game. It got Binged.
Ya it got bada binged for sure. Great move, for Microsoft.
Doesn’t that mean TechCrunch got Binged too since you are using BOSS i suppose….
true but Microsoft SVP Yusuf Mehdi is a no issue at msft…i know a few people up there who state this…nothing but a failure.
I used to work at MSN – and this is actually quite true
It will be skin war between bing and yahoo, for 5 years. Skin may even include things like arranging search suggestions, ads, so called news/image results etc.
Atleast Microsoft is happy as they dont have to pay any upfront now!
bung?
Bing-hamton University
Bing sounds like “Bin Google”.
Bingoo!
“Oh I’m just a bingolo, everywhere I go..”
And then Microsoft will get tired of Bing, at which point Yahoo would be totally YaScrewed.
I really like Bing..I always found it hard to rank for sites on Yahoo..unlike google where you can rank within a few days..
Great post Erick. Microsoft and Yahoo aside, this partnership will be awesome for the search industry and for start-ups.
I wrote my thoughts here…
http://blog.one...-for-all-of-us/
Bang!
R.I.P. Yahoo Search … and then there was two …
R.I.P. Yahoo, they need to be sent to the deadpool. The individual parts are probably worth more than the whole. Spin it off into several small companies.
Do they really think they can now take on Google? I seriously doubt a struggling search company plus a dying software company = Google killer.
Well Nick i think Bing is gaining traction and it by itself could take on Google. All this is going to do is sweeten the deal and make the transition faster. People are starting to mention Bing more so it’s just a matter of time till it becomes well known to the average folks. Heck most people i know are loving the innovation of Bing Travel, Image and Video Search and use it regularly.
Microsoft? A dying software company? HA! Only in your dreams.
Not sure what Kool-Aid your drinking, but Microsoft is no where close to being “a dying software company”.
“a dying software company” really?
a dying software company? So apparently Microsoft, which last year posted its first annual lost in its 25 year history makes it a dying company… way to go, troll.
“It is a very complicated deal. Yahoo’s sales team has enough trouble communicating with its own engineers. Now they have to learn how to talk to Microsoft’s.”
This comment resonates with me. Having managed a multi-million dollar budget Yahoo’s account managers (and the company for that matter) has done a piss poor job of focusing on improving their products. They clearly don’t interact with their engineers. Probably not smart that a lot of them are in LA and not at their Headquarters. Google on the other hand is constantly rolling out micro-updates to their search and testing for feedback and access to the engineers via the account managers is decent.
Man, Here is what I see. Yahoo’s search market will died after 10 years term ended where they are behind 10 years of search technology. Bing will swollow up their market share.
Bingo! Steve. Yahoo is like a crying baby who cries for help no a day as Bing raises.
Great move for Microsoft.
I am not sure what Carol Bartz motive is; she doesn’t want upfront cash…OK, she wants a long term revenue…OK! which eventually be gone after a decade so no strategical advantage…
It looks like either I don’t get it at all or I don’t consider her move is wise
You got it just fine. It was a stoopid deal for Yahoo. They got popped by a cherry and now will have a 10 STD then wonder why no one wants anything to do with them.
I really think this is a good move on Yahoo’s part simply because I for one have used Yahoo as my personal email and start page for many years, but I go to Google to do searches. Bing is a better search engine than Yahoo’s and now I will have no problem conducting searches directly from my start page.
This is just the beginning. Wait until yahoo.com homepage starts showing “I’m a PC” ads.
Dear Lord… Please, no…
Microsoft built a robust technology in the background and now has the big chance to roll it out to a huge userbase that isn’t really interested in who actually provides the backend. A perfect match.
The time for stupid upfront deals is over – if Yahoo doesn’t execute well it’s easy for Microsoft to eat more and more market share from them, if they are not lazy Microsoft wins too.
Yahoo isn’t a content company (aggregating contents ok, but not really producing anything) and it isn’t a search company any longer – so what remains is a branding vehicle & sales organization, some communication tools that are commodity or could easily replicated with Meebo, Facebook etc.
Maybe they should outsource Mail to Google Mail (reducing costs and selling ads there ?) and Messenger to Meebo (reducing costs and sellting ads there). Social Networking to Facebook (hmmm Microsoft will agree that the little Yahoo sister is allowed to sell some ads there…)
We’ll see if this works out well, but I think that Microsoft started playing in Google’s field again – maybe it stops them from competing heavily in the Office and Operating System fields.
If Google focusses more on Search, pure Web and mobile Apps and really making all contents findable it would help a lot. If they try to compete in too many fields they’ll loose market share year by year mainly driven by usage in companies.
Yahoo is gone. Google focusses on search. Microsoft develops platforms and robust services. Facebook for social interaction. Content comes from Entertainment and Information Companies.
The rest is the WEB.
Good analysis.
Thanks for the information
“And Yahoo needs to keep paying its sales force, but can only keep 88 percent of the revenues they generate.” But they can scale down their datacenter and staff now.
Maybe it’s good that communication between sales and engineering will be strained. It’s pretty common for sales-driven engineering to gum things up.
One to many posts about this in one day techcrunch
I’m a little more concerned about the future of Yahoo’s great open source projects.
But maybe this will herald the marriage of open source and Microsoft…
… nah, who am I kidding?
deal seems nice, Bing seems great BUT I am against Yahoo going away from being a tech company and be a content/media company, Yahoo is not CNN and is not a content producer, in the web it is about TECH and R&D, Yahoo needs to stay as a Tech company what it needs is innovation something that drives people inside it to innovate, they should offer some sort of intensives for their workforce to come up with new great ideas,something that Google did a long time ago.
They should also find a way to integrate all the things they acquired, look at mybloglog, anything changed there? any new stuff?
Yahoo + Bing = Ying
Wait, or maybe it’s Yang?
Yahoo+Bing=Ying
No,Yahoo+Bing=Yang
No, No, Yahoo+Bing=Bing
So,Dead(0)+Bing(1)=>Google(2)
Google is Too Powerful.
Google is Inovative too.
Google is Creative too.
Google is Soft too.
I can’t live without Google.
And MS is a Gay See In Couple of Years.
He/She Eats Every thing.
MSN,Yahoo, everything.
and Now Google.
Google will punch him/her right on the face.
MS is Dead.Soon.
way to go, you just fed the troll…
i think the comments on this blog have been insightful. Yahoo is gone. Microsoft is alive.
“Mike, ying that company for me and see what you find…”
what is a bing anyway? I tried to do a msn search for the first time in years the other day and was surprised to see it was replaced. Now yahoo? oh crap MS is coming back.
So how long is the countdown for Yahoo.
Got a feeling everybody involved with Yahoo Boss is about to get majorly screwed.
Yahoo needs to drop some of there stuff, the only things the majority of yahoo visitors go there for are
Yahoo Mail, Yahoo Answers, Yahoo News, Yahoo Games, Yahoo Messenger, Yahoo Groups, Hot Jobs, Horoscopes, Yahoo Finance, Yahoo Maps, Yahoo Music, Yahoo Autos and Yahoo Search.
pretty much anything else with the Yahoo name could be axed and many wouldn’t notice.
Microsoft of the other hand is just to damn big they need to get rid of many damn things, they have many products that compete with other Microsoft products they need to streamline there products
to many
mail products,
search engines/portals (MSN, Live, Bing)
to many times they have renamed products just stick to a damn name for better or worst
“to many”
“some of there stuff”
It bugs me that many IT professionals have no formal college education and are to an extent illiterate.
It doesn’t just apply to IT professionals. Most Americans and Europeans are like that.
If most Americans and Europeans are like that, then maybe Africans and Chinese should take over.
Africans? No comment.
Chinese? In my circle, we refer to not much more than Chinese as Indians with eating utensils.
I meant to say: we refer to Chinese as not much more than Indians with eating utensils.
“…for better or worst…”
“…streamline there products …”
It does make you wonder why it’s worth listening to the rant.
This is Yahoo’s last chance of survival and it’s a smart move on their part. If only they had taken that sweet 1 billion dollar deal but that’s another topic.
Bing is OK. It takes forever to get indexed and sometimes you never get indexed. One Bing to rule them all!
In other news, Yahoo’s Jerry Ybang is going back to the family business: Chinese food-to-go.
He will assume dual roles, both as a sauce-mixing apprentice (he’s only good with Moo Goo Gai Pan sauce) and as a delivery driver on the family 2001 Honda Dream 125 CC moped, specially equipped with a milk crate to on the handlebar for carrying food such as egg drop soup.
An innovator at heart, Jerry has already had some bright ideas today, officially his first day on the job, during which he engaged in a lengthy discussion with Mai-Ling, a veteran waitress, on the possibility of doing E-FortuneCookies. The idea is to send fortune cookie messages to dinner’s Blackberries, thereby avoiding the need to sweep up crumbs at the end of the night.
Very offensive.
… and worse, not even funny.
I might not have a heart towards Yahoo, but you lack a sense of humor…
Really? Jerry Yang has Chinese restaurant too? What a multi-talented man. But it is hard to believe he would run the day-to-day operations like delivering, or concern with such small details as fortune cookies. Is this true?
He can buy restaurants with his billions if he wants to.
oh sweet lord. please tell me you’re being ironic with that response.
hahahHHahahahah
lol. I knew there were other deviants like me who would also find Quemua’s piece funny. I couldn’t stop laughing!
Great insight bingfan – thx
“To err is Yahoo-ian.” (Diane Normandin)
Yahoo! never was a search engine.
I wonder how long it’ll be before Microsoft signs search partnership deals with Ask and AOL as well.
Bingo!
(pun intended)
I think Yahoo’s best strategy is to take the cash and just become a smaller company. In the end of the day they are a portal and a media site, and portals are much less of a big deal than they were 10 years ago, but there is still a need for them, and Yahoo still has properties that have value.
I would hate to own their stock because I see no growth opportunities. I wouldn’t be surprised if they did $2 billion in revenue a few years from now. That’s way down from where they are today, but still it’s nothing to sneeze at, and it’s far better than most web 2.0 companies that are getting a lot more buzz.
No, there is no need for Portals.
Wow! Finally Microsoft has reached a deal Yahoo for an internet search partnership. Will the newly announced deal between giants Microsoft and Yahoo be a good thing? Got to wait and see. But atleast Microsoft and Yahoo deal is straightforward and not complex at all and ofcourse, the negotiation talks have been going for long. I was just curious to know all the past negotiations between Microsoft and Yahoo so collected all the articles and links (more than 200) related to the current merger and the previous events or negotiations between Microsoft and Yahoo. If you are interested check the link below.
http://markthis...-from-2007.html
They will be 50/50 in a year.
can somebody pls tell me where that place is?
the image featured in the background
thanks!!
La Gittaz lake, Beaufortain, France.
If you go to http://www.bing.com/?mkt=en-us then you can browse back through previous days to see them (I can’t deeplink to it though unfortunately)
My thoughts…
“The fact is that Yahoo! was so concerned with how much they could get out of Microsoft (or maybe how cool they would be by playing difficult) that they lost track of their purpose.”
http://socialne...-finds-nothing/
Mark my words, August 2010, and you should see Bing-Yahoo with a 50% market share. Bing search is good enough as it is, but with Yahoo’s innovative features, it could really, really rock.
Google has to be shaking in its pants
No way. 20% market share (which is what Bing needs to claw back as of today – and then some) is enormous – you don’t do that in 12 months!
@jamiet
Lets hope not. Google is much better the shady Microshit. If Microshit does take over it’ll spell the end of reliable search results as we know it, soon when you search for Apple iPhone you’ll get cherry red apples from a local supermarket…. Or Windows XP crashing, you’ll get a sell sheet with why that shit never breaks…. I’m just saying.
obvious troll is obvious.
It really wonders me, being such a huge giants!! they both are not in a position to do R& d such that they come up with some innovative product that can catch the market’s eye.
Its truly amazing to think that only last year Microsoft was willing to acquire Yahoo for between $20-30 Billion, mainly to own 28 percent of the U.S. search market.
Now today, without offering a single cent Microsoft has obtained that original objective and will control all of Yahoo’s search volume and market share.
Not forgetting Flickr’s Image Database being incorporated inside Bing Images.
For Microsoft this is the Deal of the Century.
Plus with plenty of spare billions in the bank they should now try and arrange a deal with Twitter along the same lines as their deal with Facebook.
So this is a partnership not a take over?
So we won’t lose:
del.icio.us
Flickr
Yahoo! Groups
&
Yahoo! User Interface Library (YUI)
WIll we lose those?
No no, they will remain certainly. Otherwise it will bring bad name for ‘Bing’, specially for Flickr.
My questions is, what is going to happen to the Yahoo! Directory? I hope they don’t drop it as I recently paid $299 to get one of my websites listed.
Why doesn’t Yahoo! use the directory as the main results and use Bing as the backup like they used to do in the olden days? That way they can at least offer some unique user experience. Otherwise, wtf in their right mind would use Yahoo! Search when they can just go to Bing. Just my $0.02.
This doesn’t surprise me at all, but I am still surprised that Yahoo declined the MS offer to buy them out in the first place. Maybe this is a result of those talks? Who knows.
I’ll keep an interested eye out to see what difference this announcement makes but probably not much to the end user.
Why argue which search engine is doing better job? Google yahoo Bing wolframalpha Cuil, simply use site such as http://www.TilTul.com to open all of them (and other relevant sites) simultaneously in separate tabs and compare the results.
Most of us don’t even look at the next page of results.
See useful search tricks: http://www.yout...CFE1C86560DFB2F
The Unbearable Likeness of Bing: I’m not sure how Bing can expect to catch up to Google, even with the boost from Yahoo! when they don’t offer anything different or beyond what Google already does… *minus* such things as AdSense or Gmail.
It is going to be a LONG uphill climb if Microsoft intends to put the fear into Google.
Microsoft’s ONLY chance against Google would be to deliver higher quality results with a faster editorial process. But since Microsoft is shelving the yahoo technology in favor of their own, Googles share of the market will go from 65% to 99.8%.
Yahoo’s results when searching are far superior to those of Microsoft’s and Googles. Quality is good, but Yahoo’s SEM editorial policies keep ads in check and cost users thousands daily in lost revenue. No wonder people flock to Adwords over SEM all the time.
Sad to see it become MicroHOO, but it was bound to happen with anyone but me running the show there.
Oh well, life goes on and so does Google.
Love,
Mike
IMO, Search relevance on the Yahoo! engine has been extremely general. I haven’t liked their engine, but I’m sure Microsoft would love to work with Yahoo’s SEM guys.
I highly doubt this search engine war will see any sort of a conclusion any time soon…
Join the Microsoft Bing Search group on facebook.
http://www.face...gid=88288381939
Microsoft won’t catch Google, for many webmasters they still take weeks/months to index pages, whilst Google take days. The results are not good and all the flashy designs mean nothing against Google which has always been unique with it’s sleak and simple desgn.
absolutely intelligent move my Microsoft!! Yahoo got absolutely binged!!