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Yahoo and Microsoft Sitting in a Tree, K-i-s-s-i-n-g

Well over a year of flirtation, rejection, avoidance, reconnecting and late-night romantic trysts has finally yielded a Relationship today between Microsoft and Yahoo. The wording in the joint statement released as part of an SEC filing was delightful:

"This agreement comes with boatloads of value for Yahoo!, our users, and the industry," was the shout-out from Yahoo CEO Carol Bartz, who BTW really does seem to be turning the Sunnyvale company around, quarter by quarter.

Good old Steve Ballmer, Bartz's counterpart at Microsoft, aimed his verbiage at the Great Google Monster. This deal, he proclaimed, will "create more innovation in search, better value for advertisers and real consumer choice in a market currently dominated by a single company."

The deal boils down to Microsoft powering Yahoo search and Yahoo providng the global ad sales force for the joint project, the term of which is ten years. Yahoo values the deal at about $500 million a year plus $200 million in annual cost-savings; it also anticipates an annual operating cash-flow benefit of about $275 million.

The SEC filing contains pointed wording aimed to smooth any regulatory concerns that the Obama administration might have: "The agreement does not cover each company's web properties and products, email, instant messaging, display advertising, or any other aspect of the companies' businesses. In those areas, the companies will continue to compete vigorously."
Got it. They'll only be having sex in the bedroom, at night, with the lights off. No funny stuff during work hours.
Meanwhile, the consummation of this Relationship comes roughly a year later than Microsoft originally envisioned, and that's been a year when Google consolidated its huge lead in search and search advertising over these two distant competitors. Assuming the outlines of the deal obtain regulatory approval, it will probably be another year before the implementation can get under way; and another two years after that before the kinds of revenue Yahoo predicts can be realized.

Still, it is a notable moment in the compete/collaborate syndrome between the three Internet giants, particularly given the favorable response Microsoft has gotten to its new search engine, Bing. Congratulations to the happy couple!

Please check out these takes by other Bnet bloggers on the Yahoo-Microsoft partnership:
Microsoft and Yahoo: Too Little Too Late
Microsoft Wins, Yahoo Holds, Google Still Reigns in Search Game
Yahoo on Sunset Boulevard

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