If you check out the form K-8 that Yahoo filed with the Securities and Exchange Commission, last week you’ll find some interesting information, previously undisclosed about the deal.
First of all, according to that document, Yahoo has right to terminate the deal it signed with Microsoft last week;
“If the trailing 12-month average of the revenue per search (RPS) in the United States of the combined search queries of Yahoo/ Microsoft, falls below a specified percentage of Google’s estimated RPS or
“”If the combined Yahoo/ Microsoft search share in the United States falls below a specified percentage “”
Unfortunately, the form does not disclose what the “specified percentage” is for purposes of Yahoo terminating this deal.
Still it certainly gives incentive for Microsoft to perform under this agreement.
As previously reported the deal was a 10 year agreement, but Yahoo’s reported 88% share of revenues from Microsoft was only for the first five years.
However, now we know what will happen after the 5 years:
“On the fifth anniversary of the Commencement Date, Microsoft will have the option to terminate Yahoo!’s sales exclusivity for premium search advertisers. If Microsoft exercises its option, the Revenue Share Rate will increase to 93% for the remainder of the Term, unless Yahoo! exercises its option to retain its sales exclusivity, in which case the Revenue Share Rate would be reduced to 83% for the remainder of the Term. If Microsoft does not exercise such option, the Revenue Share Rate will be 90% for the remainder of the Term”
Also not disclosed in the initial discussion of the deal, is that a few bucks are going to change hands:
“Microsoft will also pay Yahoo! a payment of $50 million annually during the first three (3) years of the Search Agreement.”
Another fact not disclosed last week is that Microsoft is appearently going to guarantee Yahoo its RPS for Yahoo properties under the new deal it is currently making:
“Microsoft will provide in each country an 18-month guarantee for the gross revenue per search (the “RPS”) for Yahoo! Properties. The guarantee will be based on the RPS average for the trailing 12-month period prior to the initial implementation of paid search & Other Details services in such country.”
So lets summarize:
Yahoo gets some cash, guaranteed revenue, an ability to get out of the deal if Microsoft fails to meet certain performance goals, and possibly as high as a 93% revenue share during the second 5 year term.
Maybe this wasn’t such a bad deal for Yahoo after all.