The Microsoft–Yahoo! Deal

Last week I wrote Yahoo! Going Nowhere, “So far, I have seen absolutely NOTHING from Carol Bartz on a compelling strategy.”

More than two years back, I wrote in Yahoo!’s Turnaround Formula:”So, the first order of business for Yahoo! is to understand that brand advertising — CPM-based banner ads — is also big business, and concede the broad CPC-based Search business to Google.”

Today, for the first time, Yahoo! has signaled a constructive direction with its search deal with Microsoft. Simple. Microsoft’s Bing will be used as the technology engine. Yahoo!’s ad sales force will sell it. Yahoo! keeps 100% of the revenues for the first two years. Ninety percent thereafter. The two companies together now start this game with 35% market share.

This is a reasonable start. A necessary step, but not sufficient. MyYahoo! still remains an under-leveraged asset. Vertical Search and Personalization opportunities still abound in Yahoo!’s stronger verticals. But for the moment, yes, this is a step in the right direction – the coming together of Yahoo! and Microsoft to put up a fight against Google.