More Details on the Yahoo! Microsoft Deal Emerge: If Google Beats You, The Deal is Off
Article by George Norman
On 06 Aug 2009
Last week Microsoft and Yahoo! announced that after years of going back and forth, negotiations between the two companies have come to an end. Microsoft and Yahoo! came to an agreement which stated that for the next decade Microsoft would power Yahoo! search as Bing will become the “exclusive algorithmic search and paid search platform for Yahoo! sites.”

Yahoo! CEO Carol Bartz at the time said that this is a good thing as it will allow the company she runs to focus on other things – like improving the Yahoo! homepage, enhancing Yahoo! Messenger, and making Yahoo! Mail better. She was joined by Microsoft CEO Steve Balmer who said that the deal will attract more users and more advertisers to Bing and push Bing in the right direction as far as displaying relevant search results and relevant ads goes. Despite all of this, many voiced their opinion that the deal would spell disaster for Yahoo!’s lucrative search ad-market.


More details about the Yahoo! Microsoft deal have now come to light and they should silence those voices. In a document filed to the US Securities and Exchange Commission (SEC) it is clearly stated that Yahoo! can terminate its deal with Microsoft if the latter fails to be a proper competitor to Google Search.

“Yahoo! may terminate the Search Agreement if the trailing 12-month average of the RPS [revenue per search] in the United States (the “U.S. RPS”) of Yahoo! and Microsoft’s combined queries falls below a specified percentage of Google Inc.’s (“Google”) estimated RPS measured on a comparable basis or if the combined Yahoo! and Microsoft query market share in the United States falls below a specified percentage. On the fifth anniversary of the Search Agreement, and any time thereafter, Yahoo! has the right to terminate the Search Agreement if the trailing 12-month average of Yahoo!’s U.S. RPS is less than a specified percentage of Google’s estimated RPS,” says an excerpt from the SEC document.

Skimming through the document you will notice a few other interesting things about the Microsoft Yahoo! deal:
- At least 400 Yahoo! engineers must be hired by Microsoft and they must be paid “market-competitive compensation packages.” Microsoft will also hire 150 more Yahoo! employes to help with the transition.
- A limited, non-exclusive patent cross-licensing deal has been agreed upon by the two companies.
- If Microsoft and Yahoo! don’t finish their negotiations and wrap things up by the 27th of October, then an arbitration panel will solve their disputes.
- For the first 3 years Microsoft will pay Yahoo! the sum of $50 mil per year to “partially cover transition and implementation costs not otherwise covered under the Search Agreement.”
- Microsoft’s mapping and mobile services are available to Yahoo!, if the latter wishes to use them.
- Microsoft must ensure that the deal meets antitrust requirements (everywhere in the world).

Tags: Microsoft, bing, Yahoo!, Yahoo! Search, Google, Securities and Exchange Commission
About the author: George Norman
George is a news editor.
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More Details on the Yahoo! Microsoft Deal Emerge: If Google Beats You, The Deal is Off
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