The way the Microsoft-Yahoo search deal is constructed, Microsoft (MSFT) makes more money on searches conducted directly through Microsoft than searches conducted through Yahoo (YHOO) or via a Yahoo partner.
So no surprise then that Microsoft is reportedly trying to steal Yahoo’s search partners.
Colin Gillis, Brigantine Advisors:
- Adding to Yahoo’s woes is the fact our checks have discovered Microsoft (MSFT, unrated, $30) is aggressively bidding for Yahoo’s search partners — the same partners that would fall under the MSFT-YHOO search agreement.
- This reduces any revenue share that Yahoo would receive from Microsoft. While it is expected that the final search agreement has provisions for Yahoo to receive payments for search partners that are bid away to Microsoft — we continue to point out that the transition process for Yahoo in search is painful – and any extended delays could increase the appearance that Yahoo search is “withering on the vine”.
“Withering on the vine” is an understatement. It’s time for Yahoo investors to recognise that the company’s search business is basically done.
The company should and will continue to collect revenue share from Microsoft for a few years, but the dream of becoming the one-stop shop where advertisers can integrate search and display–and Yahoo can generate billions of dollars of annual revenue from this–are going bye-bye.
Yahoo’s search collapse, by the way, is a bummer for Microsoft, too. A year ago, the two companies had about a third of the U.S. market. Now their combined share has fallen to 28%.