Microsoft and Yahoo may be close to announcing a major search deal this week, according to a report published by Advertising Age. Yahoo will reportedly use Microsoft’s Bing as search technology, allowing Microsoft to increase Bing traffic as well as the technology’s credibility, while Yahoo may profit from a revenue share model as well as an opportunity to sell ads on Bing.com.
It is no secret that the talks between Microsoft and Yahoo have been ongoing and that it is just a matter of time until the two will find a way to work together more seriously. If Advertising Age is right, then a huge deal could be announced this week. Yahoo is apparently ready to make Bing its search technology provider in a move the company has done before with Altavista, Inktomi – and Google. In fact, it is widely believed that Yahoo’s decision to make Google its search provider back in 2000 was an important milestone for Google to gain credibility and grow into the company it is today.
Advertising Age says that Yahoo will not get an upfront payment from Microsoft, but it will get a revenue share deal from the sale of ads on Yahoo’s search pages. Yahoo will also be allowed to sell ads on Bing.com, giving the company an opportunity to provide room for its advertising inventory. Also, the deal would enable Yahoo to reduce technology expenses as it may not have to spend as much to maintain its search technology. For Microsoft, the deal is all about gaining credibility against Yahoo.
At this time it is unclear if Yahoo will agree to a “powered by Bing” logo, which seems to be tied to the demand of an upfront payment from Microsoft. In any case, Yahoo may be looking at a deal that is potentially worth billions of dollars and given Microsoft’s deep pockets and willingness to spend against Google, it may be a good time to take advantage of the situation. Microsoft CEO Steve Ballmer recently said that he is willing to spend between 5 and 10% of Microsoft’s operating income on search over the next five years. Considering that Microsoft posted about $20.4 billion in operating income for the most recent fiscal year, the company is looking at about $5 to $10 billion in funding for search.