Yahoo! and Microsoft… Microsoft and Yahoo!. Together at last. Despite what they may say about increasing innovation and the operating income of each company, this deal is about one thing: Google.
The basic terms of the deal include Microsoft running the search engine portion, in essence, making Yahoo! search an extension of Bing. Yahoo will run the ad platform. This makes perfect sense, as Yahoo! has not considered search to be a core business product for years, and didn’t really want to get its hands dirty fighting Google.
Microsoft, on the other hand, doesn’t mind getting its hands dirty. More than that, they hate being second at anything and has show a willingness to tap their deep pockets to fund a fight. Microsoft sank nearly $500 million dollars into the Xbox before seeing a profit. That’s how bad they wanted to beat the PlayStation.
This sort of agreement is not new to Yahoo!. Around 2000, Yahoo’s search platform was powered by Google. Then someone at Yahoo! woke up and realized Google was actually a competitor, so the rushed a search platform into development.
The only thing that surprised me was the length of the agreement. Ten years! That’s five complete product life cycles on the internet. It seems improbably that these two companies could get along that long to make that time line a smart move. A deal of that length says one thing to me.
Yahoo! and Microsoft are heading for a merger. This lengthy arraignment is the equivalent of dating before they get married.
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