A US$ 100 million marketing campaign by MICROSOFT has resulted in more traffic for Bing and it is getting positive reviews lately. Bing’s successful debut pushed Microsoft to reopen discussions with YAHOO so it could expose its search engine improvements to a wider audience more quickly.

Nevertheless Microsoft and Yahoo have to brace themselves for anti-trust scrutiny into whether the combination would have an adverse effect on competition in the online ad market. The U.S. Justice Department spent five months dissecting last year’s proposed search advertising partnership between Google and Yahoo before concluding that it would give Google too much control over the market. The Obama administration is promising to pore over deals more rigorously than it did when the proposed Google-Yahoo partnership came up. That may delay the implementation beyond 2010.

Under the deal Microsoft’s Bing search engine will be the exclusive algorithmic search and paid search technology for Yahoo’s sites, while Yahoo will be responsible for selling premium search ads for both companies.

Yahoo estimated the deal will boost its annual operating income by about $500 million and yield capital expenditure savings of $200 million. Yahoo also expects the deal to boost annual operating cash flow by about $275 million. Yahoo reported income from operations of $13 million in 2008, hurt by $487.5 million in goodwill impairment charge and $107 million in restructuring charges. In 2007, operating income was $695 million.
Yahoo shares fell 7.5 percent, while shares of Microsoft edged higher, and Google shares fell 1 percent in a mildly down market.   Source: Industry Reports

BIIA Newsletter September 2009 Issue