Microsoft and Yahoo have returned to the bargaining table for a possible search and online advertising partnership, according to AllThingsDigital. The deal comes as Microsoft has renewed its assault on market leader Google with its Bing search engine. Together, Microsoft and Yahoo would hold 30 percent of the search share market, less than half Google's 65 percent share.
In a sign that Microsoft isn't putting all of its search
engine eggs in its Bing basket, executives from Redmond are working to hammer out a search and
online advertising deal with Yahoo.
Microsoft may pay Yahoo several billion dollars to take
over its search advertising business and guarantee certain payments back to
Yahoo, according to AllThingsDigital blogger Kara Swisher. There is a display advertising element to the deal, with
Yahoo taking the lead in selling premium advertising for the companies.
Citing a financial analyst, 24/7 Wall Street said Yahoo would get $3 billion upfront, along with 11 percent of the revenue
that its searches provide after traffic acquisition costs in each of
the first two years. That figure would go to 90 percent in the third year.
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Microsoft declined to comment for this story. Yahoo did not respond to comment as of this writing.
The
move comes after comScore claimed Microsoft posted a .04 percent gain in search
market share in June on the strength of Bing,
its retooled search engine.
However, with Bing garnering positive reviews from search engine experts, analysts were torn on
whether Microsoft would ever rekindle its fire for Yahoo, which it tried to acquire in February 2008 for $44.6 billion, triggering a
major clash between Microsoft and the Yahoo board of directors.
Some analysts believe that if Bing proves increasingly
successful, it will mean Microsoft doesn't need Yahoo, which holds 19.5
percent of the market to Bing's 8.4 percent, according to the June 2009 stats from comScore.
Others, such as BroadPoint AmTech's Benjamin Schachter,
claim a successful Bing could push Microsoft to approach Yahoo again. Schachter
wrote in a July 15 research note: "we believe any continued success of
Bing may actually increase the odds of a Microsoft/Yahoo tie-up."
Should Microsoft and Yahoo join forces, even as just
partners, they would account for nearly 30 percent of the worldwide search market
share, still less than half of Google's 65 percent share.
Now a deal appears imminent, according to 24/7 Wall Street. Swisher was less confident in that characterization
after talking to her sources, but wrote: "If all goes well, the deal could
be announced within the next week, sources at both companies said."
Several Microsoft executives are meeting with Yahoo in
Silicon Valley to strike a deal, the latest step in a mating dance that has had
Microsoft and Yahoo circling each other for nearly two years, Swisher said.
Microsoft's Yusuf Mehdi, senior vice president of the
Online Audience Business Group, Satya Nadella, senior vice president search,
portal and advertising, and Qi Lu, president of the Online Services Group, and others
are working out the deal with Yahoo executives. Interestingly, Lu was a major
force behind Yahoo's search engine efforts before joining Microsoft last
summer.
Microsoft CEO Steve Ballmer, who was present for most of
the negotiations with Yahoo when the two companies were last bargaining, is involved
in the negotiations.
No matter what deal Microsoft and Yahoo put in place, the
companies will still have an uphill battle versus Google, whose CEO
Eric Schmidt made it clear during the company's second-quarter earnings call
July 16 that search is still the company's core focus.
"Search is still an unsolved problem," Schmidt
said on the call. "Even though Google is working very, very hard ... to
make search more social, more personal, more intelligent ... users are now
coming to us with increasingly more complex questions and queries. We're
getting much better at finding the exact information people are looking
for."
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