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Microsoft Yahoo Search Deal | Microsoft Yahoo joint website

After months of discussion, Finally Software Company Microsoft Corp and Yahoo Inc joined their web marketing for 10 years on Wednesday July 29, 2009.

Microsoft will offer both revenue guarantees to Yahoo as well as the lion's share of the search-advertising revenue generated on Yahoo's site.

Microsoft CEO Steve Ballmer said in a statement "This agreement gives us the scale and resources to create the future of search, Success in search requires both innovation and scale. With our new Bing search platform, we've created breakthrough innovation and features. This agreement with Yahoo will provide the scale we need to deliver even more rapid advances in relevancy and usefulness."

And later Microsoft will be able to incorporate Yahoo's search technology including its Panama ad-selling tool but the companies will use Microsoft's AdCenter sales tool and Bing search engine to power both sites.

Financial Growth:

Due to this deal anticipation shares of Yahoo had risen more than 7% or $1.28 to $15.94 in pre-market trading in recent weeks while shares of Microsoft edged higher by 1% or 24 cents to $23.71.

According to company’s joint statement the deal will boost Yahoo's annual operating income by about $500 million and yield capital expenditure savings of $200 million.

After the deal Yahoo will get 88 percent of search revenue created by its sites during the first five years, while Microsoft will guarantee a certain level of search revenue for 18 months in each country.

According to deal the key terms of the agreement are as follows

1. The term of the agreement is 10 years;

2. Microsoft will acquire an exclusive 10 year license to Yahoo!'s core search technologies, and Microsoft will have the ability to integrate Yahoo! search technologies into its existing web search platforms;

3. Microsoft's Bing will be the exclusive algorithmic search and paid search platform for Yahoo! sites. Yahoo! will continue to use its technology and data in other areas of its business such as enhancing display advertising technology.

4. Yahoo! will become the exclusive worldwide relationship sales force for both companies' premium search advertisers. Self-serve advertising for both companies will be fulfilled by Microsoft's AdCenter platform, and prices for all search ads will continue to be set by AdCenter's automated auction process.

5. Each company will maintain its own separate display advertising business and sales force.

6. Yahoo! will innovate and "own" the user experience on Yahoo! properties, including the user experience for search, even though it will be powered by Microsoft technology.

7. Microsoft will compensate Yahoo! through a revenue sharing agreement on traffic generated on Yahoo!'s network of both owned and operated (O&O) and affiliate sites.

8. Microsoft will pay traffic acquisition costs (TAC) to Yahoo! at an initial rate of 88% of search revenue generated on Yahoo!'s O&O sites during the first 5 years of the agreement.

9. Yahoo! will continue to syndicate its existing search affiliate partnerships.

10. Microsoft will guarantee Yahoo!'s O&O revenue per search (RPS) in each country for the first 18 months following initial implementation in that country.

11. At full implementation (expected to occur within 24 months following regulatory approval), Yahoo! estimates, based on current levels of revenue and current operating expenses, that this agreement will provide a benefit to annual GAAP operating income of approximately $500 million and capital expenditure savings of approximately $200 million. Yahoo! also estimates that this agreement will provide a benefit to annual operating cash flow of approximately $275 million.

12. The agreement protects consumer privacy by limiting the data shared between the companies to the minimum necessary to operate and improve the combined search platform, and restricts the use of search data shared between the companies. The agreement maintains the industry-leading privacy practices that each company follows today.