Microsoft and Yahoo Deal: Where's the Boatload of Cash?

The official details of the Microsoft-Yahoo deal aren't much different than the leaks I reported last night.

The companies will combine forces in search, with Yahoo taking responsibility for sales and Microsoft taking responsibility for technology. The deal will require complex integration and regulatory review, which will take at least two years to complete.

In the attached video, Colin Gillis of Brigantine Advisors and I discuss the deal and its impact on the industry. Here's a quick summary:

• Conceptually, the idea of Microsoft and Yahoo combining forces is smart. The structure of the deal, however, will make smooth execution very challenging.

• The deal seems significantly worse than expected for Yahoo, as the company will get no money upfront.
• The deal is positive for Microsoft, but largely because Microsoft was nowhere in search without it. Saving the upfront payment is also a help.
• Ironically, the deal will likely be positive for Google, which will now likely benefit from months of purgatory as Microsoft and Yahoo work to clear regulatory scrutiny and then go through the massive challenge of trying to integrate their sales forces and technology. Google itself will also now be able to argue persuasively that there is a big, viable (if discombobulated) competitor in the market.

Again, conceptually, the idea of Microsoft and Yahoo combining forces is smart. Neither alone has enough share of the search market to be a "must buy," and search relevance and pricing improves with scale. Both companies would likely just continue to lose share ad infinitum without a deal, so they have little to lose by working together. And Yahoo will gain some cost savings, at least for a while.

That said, the structure of the deal will make execution very challenging.

See also from The Business Insider:

Microsoft-Yahoo Deal A Logistical And Regulatory Nightmare