Yahoo Search Ad Deal With Microsoft Imminent
It has been reported that sources at a major client of investment house ThinkEquity say that the firm considers a Microsoft (MSFT) link-up with Yahoo! (YHOO) in the search business to be “imminent”. The comments were made by analyst William Morrison. ThinkEquity did not have an immediate comment.
Sources beyond ThinkEquity speculate that under the terms of the arrangement, Yahoo! will be paid $3 billion upfront and will get 11o% of the revenue that its searches provide after traffic acquisition costs in each of the first two years. In the third year, that figure would go to 90%.
Microsoft will then have control of 30% of the US search market if they can close the deal with Yahoo. Given that Microsoft’s own Bing is on the rise also, it will then only be about taking share away from Google. However, I can see how this deal with allow Microsoft to take marketshare from Google, Google has much better technology and a huge amount of brand loyalty. comScore put Google’s US June search share flat at 65%, Yahoo! at 19.5%, down .5%, and Microsoft at 8.4%, up .4%.
For Yahoo!, the transaction would give it the opportunity to lock in a substantial revenue stream from search and potentially save several hundred million dollars over the next three years by cutting development personnel and costs. If the transaction materializes, Yahoo!’s share could jump $4 or $5.
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