Yahoo Mail has been improved with the idea of making it focus more on the social connections that are already implicit in users' email exchanges. The Yahoo Mail homepage will now display status updates from a user's friends on the service. If a contact uploads new images to Flickr, for example, these updates will appear on the Yahoo Mail homepage (and also in Yahoo Messenger).

Yahoo also now allows users to attach up to 25MB of photos to messages and has improved its tools to attach and view these images. To make sharing photos easier, Yahoo has integrated Xoopit's 'MyPhotos' application into Yahoo Mail. Yahoo acquired Xoopit last month. In addition, Yahoo will also integrate Evite into Yahoo Mail, which makes it easier to create invitations based on a user's address book. 

In addition, Yahoo has also updated its mobile, web-based version of Yahoo Mail. The site is now a lot cleaner and allows users to read Word, Excel, and PowerPoint attachments right from within the web application.

Some of these updates are quite reminiscent of what Microsoft is doing with its Live products. On Windows Live, for example, users can also aggregate their updates from other services and see what their friends are doing online. While Yahoo is integrating all these services into Yahoo Mail, Microsoft Live splits all these tools up into separate applications.

Despite Bing Deal, Yahoo Redesigns Search

Interestingly, Yahoo also decided to preview an updated look and feel of Yahoo Search. The new look will feature a three-column layout, similar to the Yahoo homepage. While most of Yahoo's own search engine technology will obviously soon disappear in favor of Microsoft Bing, Yahoo wants to align the layout of its search engine with the rest of its services. The new layout brings services like Search Monkey and data filters into a column on the left side. None of these are new services, though they do bring old services that were often underutilized to the foreground.

People Search

Yahoo will also give its users a better way to search for people. Once these updates go live, whenever somebody uses Yahoo Search to find information about a person, Yahoo will display data from LinkedIn, Twitter, FriendFeed, and Facebook.

Nice, But What About Bing?

All of these updates are quite nice, though once Yahoo switches over to Bing, it will remain to be seen how many of Yahoo's search tools will actually survive the transition. During today's presentation, Larry Cornett, Yahoo's VP of Search Products and Design, stressed that the company will continue to invest in search technologies. During the Q&A session after today's presentation, Yahoo also focused on the fact that it will continue to control how search results are displayed, even if those results come from Bing. Yahoo will also continue to be able to add on to Bing's results, which sounds as if programs like Search Monkey could survive the transition.

Yahoo Messenger

Yahoo also announced updates to Yahoo Messenger. The new beta of Messenger 10 will launch in 25 countries and will feature support for status updates, similar to Yahoo Mail. None of these updates are extremely exciting, though it is important to remember that Yahoo Messenger has a lot of users, both in the US and worldwide. Many of these users will surely appreciate these updates, which, among others, include support for high-quality video calls.

At its core, this agreement means that Yahoo has given up on its search engine business. Microsoft will be able to increase its market share in the search engine and search advertising market. Yahoo will receive revenue from Bing searches generated on Yahoo's sites and become "the exclusive worldwide relationship sales force for both companies' premium search advertisers." What remains to be seen, though, is what will happen to Yahoo's investments in interesting search technologies like BOSS and Search Monkey. Integrating these technologies, which are tied to Yahoo's search engine, could prove rather difficult for Microsoft. We will also have to wait and see what's going to happen to Yahoo's search APIs.

If anything, the Yahoo Search team will probably not be too happy to hear Yahoo suggest on its blog that Yahoo used to offer a "great" search experience but that Bing will offer an "awesome" one. In a call earlier this morning, Yahoo CEO Carol Bartz announced that some employees from the Yahoo search team will move to Microsoft, while others will move to the display business.

Creating Competition for Google

As we pointed out before, we think Bing is a worthy competitor to Google's search engine, which both Microsoft and Yahoo try not to mention in all their press materials but whose shadow obviously looms large over this deal. Advertisers aren't likely to spend a lot of money on a search engine that only commands less than 10% of the market, but once combined with Yahoo Search, Bing could easily reach 20% or more. At this point, advertising on Bing becomes far more interesting.

In a taped video statement Microsoft's CEO Steve Ballmer argues that the agreement will bring choice back to consumers (a Silverlight version is embedded below, a WMV version is available for download here). We can't help but note that consumers always had lots of choices with regards to search engines - in the past, most just didn't make the choice Ballmer would have preferred.

It's important to note, though, that neither Microsoft nor Yahoo seem to have worked out all the details of this deal, and that users won't see any changes before early 2010. The companies expect the agreement to be reviewed by industry and government regulators before this.

The Details

Here are the details of the search/ad pact between the two companies, according to this morning's press release:

• The term of the agreement is 10 years;
• Microsoft will acquire an exclusive 10 year license to Yahoo!'s core search technologies, and Microsoft will have the ability to integrate Yahoo! search technologies into its existing web search platforms;
• Microsoft's Bing will be the exclusive algorithmic search and paid search platform for Yahoo! sites. Yahoo! will continue to use its technology and data in other areas of its business such as enhancing display advertising technology.
• Yahoo! will become the exclusive worldwide relationship sales force for both companies' premium search advertisers. Self-serve advertising for both companies will be fulfilled by Microsoft's AdCenter platform, and prices for all search ads will continue to be set by AdCenter's automated auction process.
• Each company will maintain its own separate display advertising business and sales force.
• Yahoo! will innovate and "own" the user experience on Yahoo! properties, including the user experience for search, even though it will be powered by Microsoft technology.
• Microsoft will compensate Yahoo! through a revenue sharing agreement on traffic generated on Yahoo!'s network of both owned and operated (O&O) and affiliate sites.
• Microsoft will pay traffic acquisition costs (TAC) to Yahoo! at an initial rate of 88% of search revenue generated on Yahoo!'s O&O sites during the first 5 years of the agreement.
• Yahoo! will continue to syndicate its existing search affiliate partnerships.
• Microsoft will guarantee Yahoo!'s O&O revenue per search (RPS) in each country for the first 18 months following initial implementation in that country.
• At full implementation (expected to occur within 24 months following regulatory approval), Yahoo! estimates, based on current levels of revenue and current operating expenses, that this agreement will provide a benefit to annual GAAP operating income of approximately $500 million and capital expenditure savings of approximately $200 million. Yahoo! also estimates that this agreement will provide a benefit to annual operating cash flow of approximately $275 million.
• The agreement protects consumer privacy by limiting the data shared between the companies to the minimum necessary to operate and improve the combined search platform, and restricts the use of search data shared between the companies. The agreement maintains the industry-leading privacy practices that each company follows today.

Google, of course, also shows thumbnails for YouTube clips in its search results, but clicking on these will take you to YouTube and won't open the video player right on the page.

Yahoo says that it wants to make it easier for developers to make use of SearchMonkey. SearchMonkey is an extremely powerful tool, but it can also be very hard to use for somebody who doesn't have the technical knowledge required to create a SearchMonkey app. Thanks to this new feature, even novice webmasters will now be able to embed some of the most popular forms of content on Yahoo's search results page.

As we have said before, Yahoo continues to develop new and innovative ways to enhance its search, but so far, this hasn't made too much of a dent in Google's market share. Breaking Google's momentum will be very hard for any player in the search engine market, but if anything, Yahoo is clearly showing that it is not willing to throw in the towel just yet.

After that, whenever a Facebook profile appears in your search results, it will include this person's public profile picture, as well as an additional line with the basic Facebook commands (add friend, poke, send message, view friends). According to Yahoo, Facebook shared this structured data with the SearchMonkey app by adding semantic markup to its public profile pages.

Maybe more importantly, though, features like this show that there is still a lot of life left in Yahoo Search. As Marshall Kirkpatrick noted a few weeks ago, things may not be looking too rosy for Yahoo in business terms, but the company is at least trying out a lot of cool search-related technologies.

Yahoo! Search Monkey, BOSS (Build Your Own Search Service) and Delicious are three big wins for the Yahoo! search team - even if no one has yet figured out how to turn them into money. That's not the only reason why we're all here on the web is it? Isn't it largely for love of innovation? Yahoo! in general, including the search team, deserve applause for their embrace of innovation.

SearchMonkey

SearchMonkey is really exciting, though. It's a way for site owners to add structured, dynamic data to their search results listings. It's a semantic web play and if it succeeds it should make search results all over the web much more useful. Think movie ratings displayed automatically next to a Netflix page when you search for a movie title, for starters.

BOSS

Yahoo! BOSS is another technology we find quite interesting. It's a way to use the Yahoo! index of web pages and the varoom to make searches go, but to perform those searches and show results on your own web page. People use it to make topical search engines on a wide variety of sites, but there's no better example of a great implementation than what TechCrunch has done with BOSS in their site search. A week ago today Yahoo announced that SearchMonkey markup will now be included in BOSS - enabling, in effect, custom semantic search engines powered by Yahoo! but on any website. That's powerful stuff.

Delicious

Those two innovations are big and ambitious but they are also quite new and unproven. The most solidly exciting project that Yahoo! Search has touched in the past 5 years? In our mind it's social bookmarking service Delicious. Acquired at the end of 2005, Delicious is one of the most powerful apps on the web today. Really! We use it all day long, mostly for search. Several of the ways we use it are things we wouldn't tell you about even if you pulled out our toenails, they are so useful. We will say, though, that Delicious is still the best way to track faint signals of interest by large groups of people on the web.

Founder Joshua Schachter, who joined Google last month, says Delicious would have been even more incredible had the clumsy ogres at Yahoo! not crushed it like a delicate kitten they wanted to but were unable to love properly.

If you're not familiar with Delicious (but you're still reading this far into this article?) you should check out CommonCraft's video Social Bookmarking in Plain English.

So on the Search team's 5th birthday we've got two huge technologies that were just born and one old, underdeveloped app that the founder says was suffocated by Yahoo. That's what we've got to celebrate. But in this world of advertising obsessed boredom, walled gardens and half-baked services on the part of most major consumer tech vendors - these three technologies are really something to be thankful for! That's not even mentioning Yahoo's other properties that do so much to enrich our lives, like Flickr, Pipes and Upcoming.

Yes, Yahoo! - you may get teased all the time about your trouble turning mind blowing traffic into search share and money, but on this birthday of your own search technology - we think you deserve a lot of credit for recognizing and working on some really exciting search related tools and services.

People should stop giving you such a hard time about your problems, too. We'd love to see those critics pull off what you've already done, much less beat Google.

Disclaimer: The author is a member of the Yahoo! Product Advisory Council - which means I get to visit Yahoo! a few times a year, see new products under embargo and share good times and bad with some Yahoos over dinner. At least for as long as they put up with semi-snarky blog posts like this and keep inviting me back.