Yahoo:
What it gets: Yahoo is paying below market rate for an outsourced search engine: Microsoft will pay Yahoo 88 percent of future search revenue, a better ongoing deal than had been expected, according to IDC. It gets a guaranteed stream of search revenue for 18 months, and it gets to sell all the search ads on both Yahoo and Microsoft properties. And it gets to save money, one of the highest priorities for Bartz and new Yahoo CFO Tim Morse: the company estimated it will save $200 million in capital expenditures and see an overall benefit of $500 million in operating income.
What it loses: The ability to control its own destiny when it comes to search, still the most profitable sector of online advertising by a large margin. Yahoo''s search revenue is now tied to the performance of Bing for 10 years, an eternity in the Internet world, and 88 percent of something is less than 100 percent of something.
What''s next: Probably another reorganization, and another wave of departures as talented search engineers weigh their options among Microsoft, Google, Ask.com, and start-ups. Expect rosier earnings calls where Bartz can point to the cost savings from the deal, and the evolution of a long-term plan for the company that doesn''t involve dumping businesses.
Microsoft:
What it gets: Far more search market share in one day than it could have hoped to obtain from organic Bing growth--no matter how much people may like it--over several years. All of Yahoo''s search technology is now available to Microsoft to pick and choose what it might want to use on Bing. And Microsoft also avoided having to make an upfront payment to take control of Yahoo search, as had been rumored for months leading up to the deal and hinted at by Bartz herself, claiming "boatloads of money" would be needed to pry Yahoo search away from the company.
What it loses: Relationships with advertisers on search ads, although it preserves its display ad sales operation...for now. Otherwise, Microsoft seems to have emerged from this deal pretty clean.
What''s next: Heated search competition with Google, which only means the two companies have even more reason to detest each other.