Yahoo! chief! Marissa! Mayer! stings! Bing! in! ad! bling! fling! win!
Yahoo! is rubbing its hands at the thought of juicing more ad revenue from people using its Bing-powered search engine – after tweaking its 10-year deal with Microsoft.
Back in 2009, Yahoo! agreed to use Microsoft's Bing for its web search, allowing the Redmond giant to place ads on results pages. Under the terms of the a agreement, announced today, Yahoo! will no longer be obliged to use Microsoft's ads service 100 per cent of the time for searches on Yahoo's website; just 51 per cent of the time.
That means that Yahoo! can start supplying ads from its own network, or try to strike a deal with Google to get more money that it is currently getting from Microsoft.
The change is comparatively minor – some were expecting Yahoo! to try to scrap the deal altogether – but it's important to Yahoo! and its CEO Marissa Meyer as it provides Yahoo!'s search business with a little more autonomy.
The original deal, struck between both companies' former CEOs, effectively killed off Yahoo!'s search engine and gave the blueprints to Microsoft to integrate into Bing. At the time, Microsoft was bent on competing against Google for ad money, seeing it as a vital source of revenue.
In return for the technology and exclusive rights to sell ads on Yahoo! searches, Microsoft agreed to pay Yahoo 88 per cent of the money it made from the ads (Yahoo! put its own sales team in charge presumably to keep tabs on what deals were really being struck).
Oh, Bartz ...
That deal sounded good to former Yahoo! CEO Carol Bartz, who decided her company should be a content-making business – and so hived off its search, shopping and job search services. But new CEO Marissa Mayer reportedly hates the deal, and thinks Yahoo! should be competing in the ad market rather than just taking the money.
And it is a lot of money: in 2013, Yahoo! reported that 31 per cent of its revenue came from the Microsoft deal selling ads on its own site. Meanwhile, while Microsoft has achieved its goal of increasing search traffic – for the first time this month it went above 20 per cent of the search market. Yahoo! continues to drop, now down to 12.7 per cent of the market (Google, of course, dominates with 64.4 per cent).
In November last year, Yahoo! did a deal with Mozilla to use its web search as a default in the Firefox browser, but only in the United States. Nevertheless, it did result in an uptick in people using Yahoo!'s share of the search market.
The original 2009 deal with Microsoft allowed Yahoo! to continue to develop its own search products, and it was also not obliged to sell only Microsoft ads on mobile devices: holes that Mayer has used to develop and grow new ad and search technologies.
Clearly those services are not yet robust enough for Yahoo! to walk away from the Microsoft deal, though. This interim deal should make it possible for Yahoo! to build up its new services while keeping the Microsoft dollars rolling in. ®