From Silicon Alley Insider: An SAI source confirms that Yahoo and Google have reached a search deal. The source believes that the deal will start small and ratchet up over time depending on its success. This makes sense, as a small deal will attract far less regulatory scrutiny. It will also contribute less to Yahoo’s bottom line. The deal may not be announced this afternoon.
EARLIER: WSJ reports Microsoft-Yahoo talks have formally ended, which explains why YHOO is getting crushed:
The deal unravelled last weekend, at a meeting between Yahoo directors and Microsoft representatives. At the meeting, Microsoft made it clear that it was no longer wanted to pursue a larger deal, the people [familiar with the matter] said…
The company now plans to pursue a search advertising pact with Google, a deal that could be announced as early as today. Details of the plan weren’t immediately clear but the two companies have been discussing a deal under which Yahoo would outsource its search advertising to Google.
Yahoo statement below. Meanwhile, now that Microsoft is history, Yahoo and Google are reportedly close to a search partnership.
Earlier: TechCrunch’s Michael Arrington reports that Google (GOOG) and Yahoo (YHOO) will announce “a search partnership of some sort” at 1:30 PT. We have confirmed the deal, but the announcement may not take place today.
In the meantime, here are our key points on a YHOO-GOOG search partnership:
- No way is it going to generate the incremental $1 billion of EBITDA for Yahoo some analysts have talked about.
- A smart deal–one structured to pass muster with the regulators–would not eliminate Yahoo’s Panama and would only cover a fraction of Yahoo’s overall search queries. This might deliver $200-$300 of annual EBITDA to Yahoo.
- A deal that excluded Microsoft would instantly render Microsoft’s search business DOA.
- A deal that included Microsoft–an open bidding system–would be more likely to sail through regulator hell, but it still wouldn’t save Microsoft’s search business (which depends on query share, not monetization).
More on Silicon Alley Insider >
Business Insider Emails & Alerts
Site highlights each day to your inbox.