MSFT-YHOO search deal “likely to be announced this week”: Ad Age

microsoft-yahooTalks between Microsoft and Yahoo! about deal that would have Microsoft’s Bing providing search technology for Yahoo! properties continue, according to an article in today’s Advertising Age:

Yahoo’s request for an upfront payment (it is said to have asked for several hundred million), in addition to revenue guarantees that would amount to billions over the course of the deal, caused a breakdown last week in the on-again-off-again talks. But they were revived late on Thursday, according to executives with knowledge of the situation.

Execs in Redmond never conceived of the deal as an upfront purchase of Yahoo’s search traffic but as a deal in which Yahoo would be compensated from a share of revenue from the sale of search ads. Yahoo would be allowed to sell search ads on as well as its own site, giving it more search inventory to sell and making it a bigger player in the search sales front. It would also immediately be able to save millions by not having to maintain its own search infrastructure.

Complex negotiations over revenue sharing from searches and ads clicked on Yahoo! sites, and branding issues regarding whether or not the Bing brand would be used on Yahoo! have been sticking points as well, according to the article:

Some think it’s possible that Microsoft will give up potential Bing branding if Yahoo will give up demands for an upfront payment and get the deal done. The risk in that approach, from Microsoft’s point of view, is that Yahoo would still have a strong display offering coupled with a bigger, better search sales offering, potentially hampering Microsoft’s own sales efforts.

Ad Age notes that a number of key executives from Yahoo! are now working at Microsoft. Along with Online Services President Qi Lu, who came to Microsoft last January, a number of search and data center executives have left Yahoo! to join Microsoft, including Sean Suchter, Scott Moore, Larry Heck, and Kevin Timmons.

While Bing has been generating some good buzz (and it’ s somewhat surprising that Microsoft would consider running search on Yahoo! under anything but the Bing brand), gaining search share is another matter, and Microsoft would jump from something less than 10% of US search share to around 30% with a Yahoo! deal.  Yahoo! would stand to gain as well, by shedding expensive and technically challenging search technology, joining with Microsoft on ad sales (and again, it’s still very unclear what would happen to either Yahoo! Panama ad platform, or to Microsoft’s adCenter), and concentrating on its core businesses.

Still we’ve been hearing about impending search deals for well over a year, so it’s hard to get too excited, but it looks like MSFT-YHOO might finally be seeing light at the end of the tunnel.