Microsoft To Pay Yahoo $150 Million

Yahoo CEO Carol Bartz was widely derided for not securing an upfront cash payment as part of a deal that allows Microsoft to place its Bing search engine on Yahoo's Internet properties. But regulatory papers filed in connection with the agreement show that Redmond must, in fact, pay $50 million annually to Bartz' company for three years in addition to the lion's share of revenue generated by search ads.

Yahoo may use the payments, $150 million in total, "to partially cover transition and implementation costs not otherwise covered under the search agreement," Yahoo states in papers filed Wednesday with the federal Securities and Exchange Commission.

Microsoft and Yahoo struck a wide-ranging search partnership on July 29. Under the ten-year pact, Microsoft will place its search engine on all Yahoo sites and, initially, keep 12% of the revenue from Yahoo-driven searches. Yahoo will handle sales and marketing for premium search ads for both its own properties and Microsoft's.

Yahoo's filing reveals other, previously undisclosed details about the agreement.

Among other things, Microsoft will hire a minimum of 400 Yahoo employees on a full-time basis as it extends Bing to Yahoo's Web sites. It will also hire an additional 150 Yahoo workers to help with the transition.

The SEC filing further shows that Yahoo can terminate the arrangement if search traffic generated by the alliance falls below a specified percentage of Google's traffic. Yahoo also retains the right to expand the partnership by adding Microsoft's mapping and mobile search services to its Web properties.

Microsoft must submit to Yahoo copies of all data it collects from its sites while providing search services, according to the filing.

Bartz has said that, by in effect outsourcing search to Microsoft, her company can save $200 million in annual capital expenditures through reduced spending on search-related operations. The companies said it could take up to two years for them to fully implement their agreement.