The soap opera continues as Yahoo announced that the second round of talks with Microsoft have ended because a) Microsoft no longer wished to acquire all of Yahoo and b) Yahoo did not want to sell only its search business which Microsoft did want. Can this be the end of Microsoft’s involvement in the continuing travails of Yahoo? Unless Carl Icahn miraculously wins his Yahoo proxy fight and comes knocking on Steve Ballmer’s door, the answer is hopefully yes.
Update: Microsoft’s statement basically confirms the above and says they are still willing to discuss Microsoft’s proposed "alternative transaction."
Update: The other shoe drops – Yahoo! to Strengthen Competitive Position in Online Advertising Through Non-Exclusive Agreement With Google:
The agreement will enable Yahoo! to run ads supplied by Google’s AdSense for Search and AdSense 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 agreement.
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.
Yahoo gets to choose the search/content terms where Google ads will appear, but expects to pick enough to realize "an approximately $800 million annual revenue opportunity" with "$250 million to $450 million in incremental operating cash flow" in the first 12 months. Sure it’s embarrassing that Yahoo’s vaunted Panama system can’t monetize their own properties as well as Google, but cash is cash.