Yahoo can escape Microsoft deal if it doesn't measure up to Google

The terms of Yahoo's agreement with Microsoft would allow the Sunnyvale, Calif., company to terminate their partnership if it doesn't perform well enough against Google on the key metrics of revenue per search and U.S. market share, according to a regulatory filing.

Yahoo described the termination provisions in a Form 8-K, filed yesterday afternoon with the Securities and Exchange Commission, but the catch is that the filing doesn't say precisely how well the Microsoft-driven search partnership would need to perform against Google to justify a termination. The filing refers to measures specified in the deal between the companies, without giving the actual numbers.

Here's the provision, part of a broader section on potential justifications for termination of the agreement.

Yahoo! may terminate the Search Agreement if the trailing 12-month average of the RPS in the United States (the “U.S. RPS”) of Yahoo! and Microsoft’s combined queries falls below a specified percentage of Google Inc.’s (“Google”) 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.

In addition, after five years, there appears to be a different threshold for termination. The filing says that "on the fifth anniversary of the Search Agreement, and any time thereafter, Yahoo! has the right to terminate the Search Agreement if the trailing 12-month average of Yahoo!’s U.S. RPS is less than a specified percentage of Google’s estimated RPS."

Yahoo and Microsoft currently have less than 30 percent of the U.S. search market combined, compared with 65 percent for Google, according to comScore. The Yahoo-Microsoft search partnership requires regulatory approval before it can be implemented.

A Yahoo representative declined to disclose the "specified percentages" in response to our inquiry, but we're holding out hope that the numbers might surface at some point. As one TechFlash reader pointed out via email this morning, "It would say a lot about what Microsoft thinks Bing can achieve relative to Google. Is it 50%? Is it 90%? Those numbers would have very different implications."

Also see coverage by Rafat Ali of paidContent.org.

Previously: Search deal requires Microsoft to hire at least 400 Yahoo workers 

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