Yahoo, bride of Microsoft

DETAILS of the prenuptial agreement finally signed yesterday by Microsoft and Yahoo have now been made public by the betrothed couple.

It's not exactly 'til death us do part, but it is a 10-year deal wherein the Vole gets an exclusive licence to Yahoo's core search technology that it can integrate into its own recently rebranded Bling, er, Bing.

Bing will be the exclusive algorithmic search and paid search platform for Yahoo sites.

Although Microsoft will pay no up-front dowry, it will be handing over housekeeping money in the form of traffic acquisition costs at an initial rate of 88 per cent of search revenue generated by Yahoo's websites during the first five years.

The two companies will also share revenues generated by traffic on Yahoo's sites as well as those of Yahoo affiliates.

Yahoo will do the selling to premium search advertisers, with the small fry and self-served advertisers mopped up by Microsoft's AdCenter. Both partners will continue selling their big ticket display adverts.

Yahoo said in a statement that the deal will add another $500 million to its operating income. One of the big advantages of this arrangement for both companies will be the economies of scale realised by only having to support one mega-network of search data centres. Yahoo reckons it will save $200 million in annual operating costs, which must be a relief to its increasingly nervous shareholders.

Of course the arrangement still requires the stamp of approval from federal regulators before the couple will officially be allowed to move in together. However, with their combined shares of Internet search traffic adding up to only about 28 per cent compared with Google's dominant share of approximately 65 per cent, it's not expected that the authorities will want to block the deal.

Once the hook-up is approved, Yahoo reckons it will take another two years for the partnership to achieve "full implementation". µ