Yahoo must keep its share of search above 11% for the next three years, otherwise the Microsoft deal won’t add additional profits, says Doug Anmuth of Barcalys.
His key points from the a report he released this week:
- The Microsoft partnership would still generate incremental EBITDA for Yahoo! (vs. not having the deal) down to a market share of approximately 11% – 12% in 2012.
- Every 100 bps of market share is equal to roughly $60 – $80 million of annual gross revenue and $35 – $50 million of annual EBITDA for Yahoo!.
- Our Baseline scenario represents our current estimates and assumes share declines to 16.8% in 2012.
- Our Moderate share loss scenario assumes share falls to 14% in 2012 resulting in revenue and EBITDA that is $77 million and $69 million lower than our current projections.
- Our Accelerated loss—or worst case—scenario assumes Yahoo!’s share falls from ~18% today to 10% share in 2012, impacting Yahoo!’s total revenue by 6.5% ($427 million) and EBITDA by 13.8% ($317 million) relative to our current estimates, more than offsetting the benefits of the MSFT Partnership. [Which are ~$275 M]