It seems like it is a 10 year non-exclusive tie up. I hope that $800 million revenue bump figure isn't just wishful thinking. The more I look at it the more it looks like they did this Google deal just so they could avoid being acquired by Microsoft.
The plan: Yahoo will be able to run Google ads on its U.S. and Canadian search results -- where and when it wants to -- and will continue to sell its own ads via Panama. Yahoo estimates the deal could generate $800 million in annual revenue and $250-450 million in incremental operating cash flow -- but little to no cost savings.
This Merrill guy hit what I am thinking right on the head:
Merrill: GOOG has market share leadership. Will advertisers still want to buy YHOO when they can buy GOOG and potentially get on YHOO? Any interest in your part on serving content ads on GOOG pages?
Sue: YHOO monetizes competitively with query ads, but not in the tail, because of GOOG's scale. Flexibility of deal lets us get the best of both worlds. Can optimize every single day. Will keep marketplace alive and vibrant. Components of this deal where we'll be working on other elements of value, and one might be helping Google with display ads.
What keeps a Yahoo advertiser from just switching to Google and having their ads show up in Yahoo's search queries without having to pay for both Yahoo and Google? A company could game the system by buying long-tail type words from Google and benefit from having them show up on both Google and Yahoo. They would essentially pay for Google and get Yahoo for free. It seems to me that this optimization strategy is now the linchpin of Yahoo's entire search business model going forward.
One issue that could come up is that they seem to be losing their top talent little by little. This is a really bad deal because the people with the right talent mix, who may be key to this optimization thing being a success, may take off just when Yahoo needs them the most. This Google deal may save the company from being bought out but I would be willing to bet that they won't see the $33 stock price that Microsoft was willing to pay them for years to come.
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