Today, Microsoft and Yahoo made it official announcing a 10 year search deal. According to Microsoft’s press release, the key terms of the agreement are as follows:
- The term of the agreement is 10 years;
- Microsoft will acquire an exclusive 10 year license to Yahoo!’s core search technologies, and Microsoft will have the ability to integrate Yahoo! search technologies into its existing web search platforms;
- Microsoft’s Bing will be the exclusive algorithmic search and paid search platform for Yahoo! sites. Yahoo! will continue to use its technology and data in other areas of its business such as enhancing display advertising technology.
- Yahoo! will become the exclusive worldwide relationship sales force for both companies’ premium search advertisers. Self-serve advertising for both companies will be fulfilled by Microsoft’s AdCenter platform, and prices for all search ads will continue to be set by AdCenter’s automated auction process.
- Each company will maintain its own separate display advertising business and sales force.
- Yahoo! will innovate and “own” the user experience on Yahoo! properties, including the user experience for search, even though it will be powered by Microsoft technology.
- Microsoft will compensate Yahoo! through a revenue sharing agreement on traffic generated on Yahoo!’s network of both owned and operated (O&O) and affiliate sites.
- Microsoft will pay traffic acquisition costs (TAC) to Yahoo! at an initial rate of 88% of search revenue generated on Yahoo!’s O&O sites during the first 5 years of the agreement.
- Yahoo! will continue to syndicate its existing search affiliate partnerships.
- Microsoft will guarantee Yahoo!’s O&O revenue per search (RPS) in each country for the first 18 months following initial implementation in that country.
- At full implementation (expected to occur within 24 months following regulatory approval), Yahoo! estimates, based on current levels of revenue and current operating expenses, that this agreement will provide a benefit to annual GAAP operating income of approximately $500 million and capital expenditure savings of approximately $200 million. Yahoo! also estimates that this agreement will provide a benefit to annual operating cash flow of approximately $275 million.
- The agreement protects consumer privacy by limiting the data shared between the companies to the minimum necessary to operate and improve the combined search platform, and restricts the use of search data shared between the companies. The agreement maintains the industry-leading privacy practices that each company follows today.
Perhaps Microsoft’s newly launched search engine “bing” will take over the search function on Yahoo portal is one of the immediate concerns to the search industry. And, I’m sure that search professionals targeting Japanese market are wondering how it will impact on search market in Japan.
Quite frankly, I don’t think we’ll see any changes to the search landscape and services in relation to this deals in Japan based on following facts:
- Softbank holds 40% of Yahoo Japan Corporation shares.
- Overture Japan is 100% owned by Yahoo Japan Corporation.
- The PPC advertisers on Yahoo and its ad network in Japan, have accounts with Overture Japan, and not running campaigns through Yahoo Inc.
- Currently, Overture serves the paid ads displayed on MSN/bing search result pages in Japan.
Some of the foreign (non-Japanese) businesses who heard the news about the deals may hesitate to advertise on Yahoo Japan or bing Japan in upcoming months, but it should soon go back to the norm.
Now, Yahoo Japan may see some benefits in collaborating with bing search. But, I imagine that would be done in the background rather than to putting a bing brand on Yahoo site. Bringing different brand into the well established Yahoo site could have a negative impact.
As mentioned above, they are already paid search advertising partners in Japan so there won’t be any changes. They may come up with display ads deals between the two companies, and that maybe the biggest changes we’ll see in Japan.
On the side note, Yahoo Japan’s share price is at $330 today compared to Yahoo Inc’s $15 and Microsoft’s $23 today. It doesn’t look that Yahoo Japan needs any help from Microsoft.
About Motoko Hunt
Since Motoko established AJPR in 1998, she has been working with some of the world's well known corporations, helping them to enter Japanese market using the Internet. She is a frequent speaker at the digital marketing conferences around the world. Her articles are published at several online media sites including ClickZ and MultilingualSearch. She is a Chairperson of SEMPO (Search Engine Marketing Professional Organization) Asia Working Group. Visit +Motoko Hunt on Google+.