Yahoo's get-out clause in Microsoft deal

 

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By Stuart Turton

Posted on 5 Aug 2009 at 10:53

Yahoo will be allowed to bail out of its search deal with Microsoft, if their combined market share falls too far behind Google's.

The clause can be found in a filing lodged with the Securities and Exchange Commission and reads: "The Search Agreement may only be terminated as follows ... if the trailing 12-month average of the RPS [revenue per search] in the US of Yahoo and Microsoft's combined queries falls below a specified percentage of Google's estimated RPS measured on a comparable basis or if the combined Yahoo and Microsoft query market share in the United States falls below a specified percentage."

ComScore pegs Yahoo and Microsoft's combined share of the US search market at 28%, with Google holding 65%. The companies were not willing to divulge how far behind they would have to fall to trigger the clause.

The document does not disclose what the companies are earning in revenue per search, and they would not comment on the matter. However, Yahoo will also be able to review the deal after five years, with the ability to amend clauses based on its revenue per share viewed against Google's.

Alongside the escape clause, the filing also throws up another interesting nuggets. Though Microsoft will not be making a huge payment upfront to Yahoo, it has agreed to pay the company $50 million annually for the first three years "to partially cover transition and implementation costs."