Yahoo, Google Sign Ad Deal

There’s a battle going on in the technology world over Yahoo, the search and advertising company. Microsoft wants to buy it, and Google wants to sign deals with it. Microsoft has so far failed in buying the company, but Google has inked a deal with Yahoo this morning, which means Google will supply Yahoo with some search ads.Yahoo is very positive about the deal, of course, and expects the deal to raise revenue by USD 800 million during its first year, and an increase in incremental operating cash flow by USD 250 to USD 450 million. In addition, the deal covers making the two companies’ IM services interoperable. Yahoo CEO Jerry Yang: “We see this as a good, open, flexible deal and [one that] helps Yahoo be strengthened as a good longer-term competitor.”

Sue Decker, Yahoo President, added:

This agreement provides a source of funds to both deliver financial value to stockholders from search monetization and to invest in our broader strategy to transform display advertising and advance our starting-point objectives with users. It enhances competition by promoting our ability to compete in the marketplace where we are especially well-positioned: in the convergence of search and display.

In the meantime, Microsoft draws the shortest straw. In a statement released yesterday, Yahoo stated the talks with Microsoft have ended, and that nor a complete acquisition, nor a smaller partnership came out of them. “Microsoft representatives stated unequivocally that Microsoft is not interested in pursuing an acquisition of all of Yahoo!, even at the price range it had previously suggested,” the statement reads, “With respect to an acquisition of Yahoo!’s search business alone that Microsoft had proposed, Yahoo!’s Board of Directors has determined, after careful evaluation, that such a transaction would not be consistent with the company’s view of the converging search and display marketplaces, would leave the company without an independent search business that it views as critical to its strategic future and would not be in the best interests of Yahoo! stockholders.”

Obviously, Microsoft isn’t exactly happy with the Yahoo-Google deal. Microsoft spokesman Jack Evans explains:

Our position has been clear since April that any deal between these two companies will increase prices for advertisers and start to consolidate more than 90 percent of the search advertising market in Google’s hands. Legal and industry experts agree that this would clearly make the market less competitive.

Now, where did we hear that 90% figure before? Anyway, the deal with Google is non-exclusive, and as such, the future may still hold a partnership between Microsoft and Yahoo. For now, however, the victory goes to Google.


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