August 4th, 2009
Yahoo-Microsoft deal: Details from the SEC filing
Yahoo on Tuesday revealed details of its search agreement with Microsoft in a filing with the Securities and Exchange Commission, including information about revenue sharing, technology licensing and implementation plans.
Among the highlights:
- For the first five years of the 10-year-agreement, Yahoo will be entitled to receive 88% of the net revenues generated from Microsoft’s services on Yahoo Properties - thereafter called its Revenue Share Rate.
- Yahoo! will also be entitled to receive its share of the net revenues generated on Syndication Properties after the Syndication Partner’s share of net revenues is deducted.
- After the fifth year, Microsoft will have the option to terminate Yahoo!’s sales exclusivity for premium search advertisers. If it does so, Yahoo’s Revenue Share Rate increases to 93% for remaining time. If Yahoo exercises its option to retain its sales exclusivity, the Revenue Share Rate drops to 83 percent for the rest of the term. If Microsoft does not exercise its option, the Revenue Share Rate will become 90% for the remainder of the Term.
Also worth noting is that Microsoft will pay Yahoo $50 million annually during the first three years of the agreement, which may be used to “partially cover transition and implementation costs not otherwise covered” under the deal.
Further down in the filing, the company notes that the two will come up with a detailed transition and implementation plan and schedule - one that will be no longer than 24 months.
Finally, in terms of licensing, Yahoo will grant a worldwide license under copyrights and trade secrets as it relates to Yahoo’s technologies. Specifically, the companies said:
The Technology License will be exclusive (even as to Yahoo!) as to certain algorithmic search and paid search services in the Field of Use. Upon termination or expiration of the Search Agreement, the Technology License will remain in effect but will become non-exclusive. During the Term, Yahoo! will grant to Microsoft a worldwide, non-exclusive limited patent license solely for Microsoft to provide services in the Field of Use to Yahoo!; and Microsoft will grant to Yahoo! a worldwide, non-exclusive limited patent license for Yahoo! to use and implement the services provided by Microsoft, as contemplated by the Search Agreement (the “Limited Patent Cross License”). The Limited Patent Cross License terminates upon the termination of the Search Agreement.
Previous coverage:
- It’s official: Microsoft-Yahoo ink 10-year search pact; Regulator scrum begins
- Mary Jo Foley: Microsoft and Yahoo: Still a few surprises
- With Microsoft search deal Yahoo risks becoming AOL
- Ballmer on the Microsoft-Yahoo deal: ‘Nobody gets it’
Sam Diaz is a senior editor at ZDNet. See his full profile and disclosure of his industry affiliations.
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