This week, Yahoo! submitted an 8-k filing to the U.S. Securities and Exchange Commission pertaining to the new search deal they’ve struck with Microsoft. In it are more details on how the plan would unfold.
For the first 3 years of the plan, Microsoft will pay Yahoo! $50 million annually. This is in addition to the 88% revenue share from search advertising on Yahoo! and partner sites. This type of revenue is something investors wanted. When the announcement of the deal first came out, only the revenue sharing was said to be part of the deal. This $50 million per year for 3 years makes Wall Street happier, but it’s still bewildering why this wasn’t mentioned last week (a possible last minute addition?).
After the first 5 years, Microsoft is permitted to cancel the Yahoo!’s exclusive control of search ads. If that were to happen, Yahoo! would receive 93% revenue share on ads on its sites. Or Yahoo! could veto Microsoft’s termination, but that would mean the revenue share would be reduced to 83%.
As a result of Microsoft taking over search, they will be required to hire 400 Yahoo! employees, plus 150 more to help with transition purposes.
Yahoo! also has the option of bailing on the deal if the revenue-per-search query (RPS) is less than a certain percentage of Google’s estimated RPS on a 12-month average.
They couldn’t then go to Google. Last year, Yahoo! and Google were working on a search deal when Google bailed under DOJ antitrust lawsuit threats. AOL uses Google search and Ask.com has a paid search deal with Google, as well.