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Microsoft Takes Over Yahoo Search

YahooMicrosoft and Yahoo have finally come up with an agreement that will see Microsoft take total control over Yahoo’s search technologies.

The deal still needs to have regulatory approval but both sides expect to have everything in place by early 2010, so here are some of the key points agreed so far:

Microsoft will have total control of Yahoo! search technologies for the next 10 years, which will see Yahoo! using Microsoft technologies in its search platforms, in this case Bing.

Bing will be the official search engine for organic and paid search for Yahoo! sites, but Yahoo! will still be allowed to use its technologies and data in other areas. Each company will maintain its own separate display advertising business and sales force.

After full implementation and following regulatory implementation Yahoo estimates to provide a benefit to annual operating income of approximately $500 million and capital expenditures savings of $200 million, numbers are based on the current levels of revenue and operating expenses.

Yahoo! estimates that the deal will generate an annual cash flow of approximately $275 million – though there will be more than a few investors wondering why Yahoo! didn’t take the billions on offer last year.

We can only see Microsoft benefiting from such deal, and don’t see any advantages for Yahoo! itself. And it certainly gives Steve Ballmer a big boost as a lot of people thought he would struggle when he took over from Bill Gates.

What this means for search in the longer terms is interesting some people like Jason Calacanis commented that now there are only two major search engines maybe there is space for a new search engines  or will we see Ask step up to the mark and become a bigger player? Though as Jason owns Maholo (a search engine) he might be a bit biased.

“Interesting Times” as the Chinese proverb says but we suspect that it will be at least nine months to a year before we can see what’s really happening. And lets see if Google can resist making major mistakes like they did over the last time Microsoft and Yahoo tried to merge.

There is a merger specific website that Yahoo and Microsoft have set up, to provide information on the deal.

HEDGEHOG DIGITAL LIMITED

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