Yahoo Inc has struck a deal with rival Google to run the online search leader's ads alongside its own search results in hopes of boosting its sagging fortunes
SILICON VALLEY : Yahoo Inc has struck a deal with rival Google to run the online search leader's ads alongside its own search results in hopes of boosting its sagging fortunes, hours after announcing that its talks with Microsoft regarding a potential transaction had fallen through.
In a statement, Yahoo said on Thursday night it expects the pact -- under which it will show Google ads next to its search results on some of its websites in the US and Canada -- will increase its revenues by approximately USD800 million in the first 12 months, and generate an additional estimated USD250 million to USD450 million in incremental operating cash flow.
"We believe that the convergence of search and display is the next major development in the evolution of the rapidly changing online advertising industry. Our strategies are specifically designed to capitalise on this convergence -- and this agreement helps us move them forward in a significant way," Yahoo CEO and co-founder Jerry Yang said.
Yahoo President Sue Decker said the agreement "provides a source of funds to both deliver financial value to stockholders from search monetisation and to invest in our broader strategy to transform display advertising and advance our starting point objectives with users."
The companies have agreed to delay implementation of the agreement for up to three-and-a-half months while the US Department of Justice reviews the arrangement. The partnership with Google was widely anticipated after Yahoo failed to reach an agreement with Microsoft.
Earlier in the day, Yahoo announced that its talks with Microsoft regarding a potential transaction -- whether for an acquisition of all of Yahoo or a partial acquisition -- had ended.
The internet company said that it had held several meetings and discussions with the software major including a June 8 meeting where Microsoft representatives "stated unequivocally that Microsoft is not interested in pursuing an acquisition of all of Yahoo, even at the price range it had previously suggested."
With respect to an acquisition of Yahoo's search business alone, the board had determined that such a transaction would not be consistent with the company's view of the converging search and display market places, it said.
It would "leave the company without an independent search business that it views as critical to its strategic future and would not be in the best interests of Yahoo stockholders," it said.
Microsoft confirmed that talks have ceased, but said it is still interested in an "alternative" transaction. "In the weeks since Microsoft withdrew its offer to acquire Yahoo, the two companies have continued to discuss an alternative transaction that Microsoft believes would have delivered in excess of USD33 per share to the Yahoo shareholders," Microsoft said in a statement.
"This partnership would ensure healthy competition in the marketplace, providing greater choice and innovation for advertisers, publishers and consumers.
"As stated on May 3rd and reiterated on May 18th Microsoft was not interested in rebidding for all of Yahoo. Our alternative transaction remains available for discussion," Microsoft's statement said.
While Yahoo may have averted the acquisition threat from Microsoft, it is yet to resolve its problems with activist investor Carl Icahn who has launched a proxy fight to unseat the current Yahoo board, which includes CEO Yang.
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