Yahoo Looking for a Way Out from Microsoft Search Deal!

May 9, 2013 | 1,704 views | by Navneet Kaushal
VN:F [1.9.20_1166]
Rating: 4.0/5 (4 votes cast)

Although Yahoo and Microsoft have extended their revenue-per-search deal, but talks are around that Yahoo is trying every bit to escape from its 10-year search deal with Microsoft and join hands with Google. 

Yahoo's Marissa Mayer has also been spotted talking about not-so-happy deal with Microsoft at the Goldman Sachs Technology and Internet Conference in February. Here's an extract from what she said, 

"Our biggest business problem right now is [page] impressions. Basically can we grow impressions, can we get growth happening here?" She also said, "We need to see monetization working better because we know that it can and we've seen other competitors in the space illustrate how well it can work".

It was in July 2009 that Yahoo and Microsoft entered into an agreement with the expectation to give a tough competition to Google in the search market. While Microsoft's Bing will power Yahoo Search, Yahoo on the other hand will use its solid relationship with advertisers to act as the salesforce for both the companies.

A Bloomberg report however said that Marissa Mayer has already made unsuccessful attempts to get Yahoo out of the deal. She has in fact met Google and agreed to sign an alternative search partnership; Yahoo is able to come out of the Microsoft agreement. 

The Wall Street Journal also reported:

Under the deal, Microsoft gets 12% of the revenue Yahoo generates from search ads that appear next to search results on its websites. Because the combined search-ad system was expected to face challenges initially, Microsoft guaranteed a certain level of revenue for every search query done on Yahoo’s sites. The regulatory filing says the revenue guarantee expired on March 31, but Microsoft on April 30 agreed to extend it for an additional 12 months.

Jordan Rohan, an analyst at Stifel Nicholas & Co., estimated that Microsoft’s revenue-per-search guarantee is worth about $12 million to $15 million per quarter.

Microsoft won't be able to remove its exclusivity until February 23, 2015. If Microsoft continues with the deal, it will receive 17 percent of the revenue generated with the tie-up.

As per the deal terms, it can only be called off if:

  • Bing sells
  • Microsoft closes
  • Yahoo's revenue per search gets below 40 percent of Google's revenue

Since, Yahoo's search revenue had seen a growth of 6 percent every year, and raised to $409 in first quarter of 2013, breaking terms on the third clause seems difficult Yahoo.

There were two contradictory statements from spokesperson of Microsoft and Yahoo. While Yahoo's spokesperson said, " “Microsoft is an important partner, and we continue to work together to grow search share and improve monetization.”

Microsoft was spotted saying that the company is working closely with Yahoo to strengthen its partnership further so that it can deliver real choice and value to both; consumers and advertisers.

Yahoo Looking for a Way Out from Microsoft Search Deal!, 4.0 out of 5 based on 4 ratings
4.thumbnail Yahoo Looking for a Way Out from Microsoft Search Deal!

Navneet Kaushal

Navneet Kaushal is the founder and CEO of PageTraffic, an SEO Agency in India with offices in Chicago, Mumbai and London. A leading search strategist, Navneet helps clients maintain an edge in search engines and the online media. Navneet's expertise has established PageTraffic as one of the most awarded and successful search marketing agencies.
4.thumbnail Yahoo Looking for a Way Out from Microsoft Search Deal!
4.thumbnail Yahoo Looking for a Way Out from Microsoft Search Deal!