Different Takes on the Microsoft-Yahoo! Deal

MicrosoftLogo.jpgThe New York TimesBits Blog was all over Wednesday’s agreement between Microsoft and Yahoo!, looking at the transaction from several angles. And Yahoo! CEO Carol Bartz and Microsoft CEO Steve Ballmer discussed the deal in detail with Fortune‘s Brainstorm: TECH.

On the deal’s impact on Google, Bits Blog pointed out, “More bidders for the same supply should lead to higher prices. That means more money for Microsoft and also for Yahoo!, which will get 88% of the revenue from searches on its sites. But that doesn’t mean that Google will lose anything. It still has the largest marketplace, the best advertising technology and, thus, the highest revenue per search. Even if Microsoft earns more, the bids on Google won’t necessarily go down.”

YahooLogo.jpgThe Times added,”Even with the deal, the Microsoft-Yahoo! search operation will be dwarfed by Google—with a 28% market share in the United States, versus 65%—and will face an uphill struggle to try to wean people away from Google’s simple white search page.”

Advertisers were enthusiastic about the Microsoft-Yahoo! combination, with David Kenny, managing partner of VivaKi, the digital unit of Publicis Groupe, telling Bits Blog, “It’s got a good interface, but the real question is audience and, obviously, getting Bing embedded inside of Yahoo! will give it a bigger audience,” and Covario chief executive Russ Mann adding, “From what we can tell, we think this is going to be a very powerful combination,” and saying ads for his clients on MSN and Bing regularly yielded higher conversion rates than on Yahoo! or Google, so he was pleased to see the Microsoft search engine expanding.


Finally, highlights from the Q&A by Bartz and Ballmer with Fortune‘s Brainstorm: TECH:

Bartz:

But at the end of the day, what we’ve got here is virtually all of our revenue at no cost, because Microsoft is bearing the cost of the technology. And that allows us to focus on other aspects of our business like growing the users, growing the audience and growing mobile, growing display—which, by the way, should grow search advertising.

Ballmer:

Microsoft has two deals with Facebook. We have a deal where we are a partner selling display ads—that is unaffected. It may be an area where we compete with Yahoo! occasionally because we both like to sell people’s display ads. We’re also the search provider to Facebook. That’s a deal that we did, Yahoo!’s uninvolved. Yahoo! has its own set of affiliates for search, and we will be a vendor to Yahoo! as they serve their affiliate partners. We will be embedded in what Yahoo! goes and offers to its affiliate partners—it’s their relationship with their affiliates, and then we will have a back-end business deal that applies.

Bartz:

Whether it’s owned and operated or affiliate, Microsoft gets 12% for powering the search. But the 12% is on the revenue Yahoo! gets. So let’s say we give the affiliate 30 points and Yahoo! only gets 70. Microsoft gets 12% of the 70.

Related Stories
Mediabistro Course

Social Media 201

Social Media 201Starting October 13Social Media 201 picks up where Social Media 101 left off, to provide you with hands-on instruction for gaining likes, followers, retweets, favorites, pins, and engagement. Social media experts will teach you how to make social media marketing work for your bottom line and achieving your business goals. Register now!