Agreement Advances Yahoo!'s Open Strategy; Enhances Ability to Compete
in Converging Search and Display Marketplace
SUNNYVALE, CA, June 12 /CNW/ - Yahoo! Inc. (Nasdaq: YHOO), a leading
global Internet company, announced today that it has reached an agreement with
Google Inc. that will enhance its ability to compete in the converging search
and display marketplace, advancing the company's open strategy. The agreement
enables Yahoo! to run ads supplied by Google alongside Yahoo!'s search results
and on some of its web properties in the United States and Canada. The
agreement is non-exclusive, giving Yahoo! the ability to display paid search
results from Google, other third parties, and Yahoo!'s own Panama marketplace.
Under the terms of the agreement, Yahoo! will select the search term
queries for which - and the pages on which - Yahoo! may offer Google paid
search results. Yahoo! will define its users' experience and will determine
the number and placement of the results provided by Google and the mix of paid
results provided by Panama, Google or other providers. The agreement applies
to paid search and content match and does not apply to algorithmic search. The
agreement also applies to current partners in Yahoo's publisher network.
Yahoo! CEO and co-founder Jerry Yang said, "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 capitalize on this convergence -- and this
agreement helps us move them forward in a significant way. It also represents
an important next step in our open strategy, building on the progress we have
already made in advancing a more open marketplace."
"This agreement provides a source of funds to both deliver financial
value to stockholders from search monetization and to invest in our broader
strategy to transform display advertising and advance our starting point
objectives with users," said Yahoo! President Sue Decker. "It enhances
competition by promoting our ability to compete in the marketplace where we
are especially well positioned: in the convergence of search and display."
Agreement Provides Attractive Economics and Enhances Search Monetization
Yahoo! believes that this agreement will enable the Company to better
monetize Yahoo!'s search inventory in the United States and Canada. At current
monetization rates, this is an approximately $800 million annual revenue
opportunity. In the first 12 months following implementation, Yahoo! expects
the agreement to generate an estimated $250 million to $450 million in
incremental operating cash flow.
The agreement will enhance Yahoo!'s ability to achieve its goal to grow
operating cash flow significantly, while at the same time providing
flexibility to continue to invest in ongoing initiatives such as algorithmic
search innovation and search and display advertising platforms. It gives
Yahoo! complete flexibility to continue to use its Panama paid search results.
Significant Benefits Will Flow to Users, Advertisers, Publishers and
Users will also benefit from Yahoo!'s ability to invest incremental
operating cash flow in ongoing improvements to its search services, building
upon recent major innovations such as Search Assist and SearchMonkey.
Advertisers will continue to benefit from multiple marketplace alternatives
including Panama, Google and others. Publishers will benefit from a winning
combination of distribution, monetization and services to help them grow their
businesses. The financial benefits will enable Yahoo! to broaden the scope of
its investments and initiatives, enhancing Yahoo!'s ability to offer
attractive career opportunities to its employees.
Terms of the Agreement
The agreement will enable Yahoo! to run ads supplied by Google's
AdSense (TM) for Search and AdSense(TM) for Content services next to Yahoo!'s
internally generated paid search and algorithmic search results. Yahoo! may
also run Google-supplied ads on non-search Yahoo! web properties, as well as
on current members of its partner network. The agreement has a term of up to
ten years: a four-year initial term and two, three-year renewals at Yahoo!'s
option. It applies to Yahoo!'s operations in the U.S. and Canada only.
Advertisers will continue to pay Yahoo! directly for clicks served by Yahoo!
from Yahoo!'s Panama and Content Match marketplaces. Advertisers will pay
Google directly for each click on Google paid search results appearing on
Yahoo! owned and operated network or certain affiliate sites. Google will
share a percentage of such revenue with Yahoo!.
In addition, Yahoo! and Google agreed to enable interoperability between
their respective instant messaging services, bringing easier and broader
communication to users.
The agreement allows either party to terminate the agreement in the event
of a change in control of either party. The agreement also requires Yahoo! to
pay a termination fee if the agreement is terminated as a result of a change
in control that occurs within 24 months. The termination fee is $250 million,
subject to reduction by 50 percent of revenues earned by Google under the
Although Google and Yahoo! are not required to receive regulatory
approval of the deal before implementing it, the companies have voluntarily
agreed to delay implementation for up to three and a half months while the
U.S. Department of Justice reviews the arrangement.
Goldman, Sachs & Co., Lehman Brothers and Moelis & Company are acting as
financial advisors to Yahoo!. Skadden, Arps, Slate, Meagher & Flom LLP is
acting as legal advisor to Yahoo!, and Munger Tolles & Olson LLP is acting as
counsel to the outside directors of Yahoo!.
Yahoo! will host a conference call to discuss the agreement with Google
at 6:30 p.m. Eastern Time today. To listen to the call live, please dial
877-391-6847 (reservation number 70308474 followed by the number sign). A live
audiocast of the conference call can be accessed through the Company's
Investor Relations website at http://yhoo.client.shareholder.com/index.cfm. In
addition, an archive of the audiocast can be accessed through the same link.
An audio replay of the call will be available following the conference call by
calling 888-286-8010 (reservation number 84138579).
About Yahoo! Inc.
Yahoo! Inc. is a leading global Internet brand and one of the most
trafficked Internet destinations worldwide. Yahoo! is focused on powering its
communities of users, advertisers, publishers, and developers by creating
indispensable experiences built on trust. Yahoo! is headquartered in
Non-GAAP Financial Measures
This release refers to operating cash flow (operating income before
depreciation, amortization of intangible assets, and stock-based compensation
expense, or OCF), which is a non-GAAP financial measure. The most comparable
GAAP measure is income from operations. With respect to the OCF numbers
provided in this release, the estimate of income from operations is the same
as the estimated OCF, as the Company does not expect to incur any additional
depreciation and amortization or stock-based compensation expense related to
This release (including without limitation the statements and information
in the quotations from management in this press release) contains
forward-looking statements that involve risks and uncertainties concerning
Yahoo!'s projected financial performance as well as Yahoo!'s strategic and
operational plans. Actual results may differ materially from those described
in this press release due to a number of risks and uncertainties. The
potential risks and uncertainties include, among others, the expected benefits
of the services agreement with Google may not be realized, including as a
result of actions taken by United States or foreign regulatory authorities and
the response or acceptance of the agreement by publishers, advertisers, users
and employees; the implementation and results of Yahoo!'s ongoing strategic
initiatives; Yahoo!'s ability to compete with new or existing competitors;
reduction in spending by, or loss of, marketing services customers; the demand
by customers for Yahoo!'s premium services; acceptance by users of new
products and services; risks related to joint ventures and the integration of
acquisitions; risks related to Yahoo!'s international operations; failure to
manage growth and diversification; adverse results in litigation, including
intellectual property infringement claims; Yahoo!'s ability to protect its
intellectual property and the value of its brands; dependence on key
personnel; dependence on third parties for technology, services, content and
distribution; general economic conditions and changes in economic conditions;
and potential continuing uncertainty arising in connection with the withdrawal
of Microsoft's unsolicited proposal to acquire Yahoo!, and the announced
intention by a stockholder to seek control of our Board of Directors, the
possibility that Microsoft or another person may in the future make another
proposal, or take other actions which may create uncertainty for our
employees, publishers, advertisers and other business partners, and the
possibility of significant costs of defense, indemnification and liability
resulting from stockholder litigation relating to the Microsoft proposal. More
information about potential factors that could affect Yahoo!'s business and
financial results is included under the captions "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Yahoo!'s Annual Report on Form 10-K for the fiscal year ended
December 31, 2007, as amended, and the Quarterly Report on Form 10-Q for the
quarter ended March 31, 2008, which are on file with the Securities and
Exchange Commission ("SEC") and available at the SEC's website at www.sec.gov.
All information in this release is as of June 12, 2008, unless otherwise
noted, and Yahoo! does not intend, and undertakes no duty, to update or
otherwise revise the information contained in this release.
Yahoo! and the Yahoo! logos are trademarks and/or registered trademarks
of Yahoo! Inc. All other names are trademarks and/or registered trademarks of
their respective owners.
For further information:
For further information: Yahoo! Inc., Tracy Schmaler, (202) 631-9463
(Media), firstname.lastname@example.org; Marta Nichols, (408) 349-3527 (Investors),
mnichols@yahoo-Inc.com; The Abernathy MacGregor Group for Yahoo! Inc., Adam
Miller, Winnie Lerner, (212) 371-5999 (Media), email@example.com, firstname.lastname@example.org