3 min read

Microsoft-Yahoo Deal Could Go Global

Microsoft chief says companies could roll out search alliance internationally once approvals are in place.
Steve Ballmer said Thursday that Microsoft and Yahoo may extend their Internet search partnership globally once the pact has been approved in the U.S.

"As you know we signed a partnership with Yahoo in the U.S.," said Microsoft's CEO, speaking at a press conference in Tokyo.

"It's possible we would extend that partnership outside of the U.S., but we'll have to wait and see until we actually are able to get approval and consummate our partnership with Yahoo inside the US, and perhaps there'll be news on that some other day," said Ballmer.

Microsoft and Yahoo, of course, first have to get their alliance up and running in their home market in the U.S.—and that's apparently taking longer than planned.

The tech giants previously said they would have the deal signed by Oct. 27, but that deadline came and went last week without a formal partnership in place. "Given the complex nature of the transaction, there remain some details to be finalized," Yahoo said in a filing with the Securities and Exchange Commission.

"The parties are working diligently on finalizing the arrangements, have made good progress to date, and have agreed to execute the agreements as expeditiously as possible," Yahoo said. One possible sticking point may be the complex revenue sharing formula under which the companies will split search dollars.

Despite the delay, Yahoo CEO Carol Bartz assured analysts that the deal would get done.

Microsoft and Yahoo unveiled their wide ranging search alliance on July 29, following months of on-again, off-again negotiations. The pact calls for Microsoft's Bing technology to power queries on all of Yahoo's Web properties, while Yahoo assumes broad sales responsibilities for its own, and Microsoft's, Internet platforms.

Microsoft's AdCenter platform will serve as a self-service search advertising tool for both companies. The deal does not extend to Internet display advertising. Yahoo, meanwhile, will continue to "own" the overall user experience on its search pages, though Bing will carry out the actual queries.

Microsoft will compensate Yahoo for traffic from Yahoo's sites under a revenue sharing formula under which Yahoo will retain 88% of the search revenue generated on its pages for the first five years of the deal.

Yahoo has said it expects the arrangement to add $500 million to annual operating income and $275 million to cash flow while cutting capital expenses by $200 million.

InformationWeek and Dr. Dobb's have published an in-depth report on how Web application development is moving to online platforms. Download the report here (registration required).