We finally have a “Microhoo” folks!

Although not quite the merger nor acquisition that some folks were clamming for in years past, Microsoft and Yahoo! have finally come to terms on an agreement that will hopefully position both companies for a better fight against search king Google. The basics of the agreement boils down to the following: Microsoft will now power Yahoo! search while Yahoo! will become the “exclusive” worldwide sales force for both companies’ premium search advertisers.

Want more of the nitty gritty? Here ya go:

  • This is a 10 year agreement
  • Microsoft will acquire an exclusive 10 year license to Yahoo!’s core search technologies – with Microsoft having the ability to integrate Yahoo! search technologies into existing web search platforms
  • It’s all about Microsoft Bing when it comes to search for both companies. Bing will power Yahoo! search and sites. Yahoo! will continue to use its own technology in other areas of business like enhancing display advertising technology
  • Each company will maintain separate display advertising business and sales force
  • Yahoo! will maintain their look and feel on their sites
  • Yahoo! will focus on a core business or web content and products for its users
  • Yahoo! and Microsoft search marketplaces will be combined making it easier for advertisers
  • Microsoft will compensate Yahoo via revenue sharing agreement on traffic generated on Yahoo!’s network of sites
  • Microsoft will pay traffic acquisition costs (TAC) to Yahoo at an initial rate of 88% of search revenue generated on Yahoo owned and operated sites during the first 5 yrs of the agreement

Yahoo estimates that at “full implementation”, this agreement will:

  • improve annual GAAP operating income of approximately $500 million
  • save capital expenditure by $200 million
  • improve operating cash flow by approximately $275 million

The Microsoft-Yahoo agreement does not cover other areas of their respective businesses including email, IM, display advertising etc. Both companies are hopeful that the deal will close by early 2010. You’ll be able to read more about this on a site the two companies have established over at http://www.choicevalueinnovation.com/

[Check it out]

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