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).
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