Yahoo and Microsoft to have more search flexibility along with reallocated ad revenue in new agreement
Yahoo! Inc. (NASDAQ: YHOO) and Microsoft Corporation (NASDAQ: MSFT) executives have updated a long-term search partnership today for an agreement drafted in 2009 when predecessors, Microsoft CEO Steve Balmer and Yahoo CEO Carol Bartz entered a search partnership to rival the seismic Google Inc. (NASDAQ: GOOG), in an agreement that would be revisited mid-way through its inception. The revised partnership arrived after a month of negotiations in two core areas: aiming to allow more flexibility in how search results are displayed as the influence of mobile devices grow and alter the way advertising teams are managed between the two tech giants.
The original agreement left Microsoft in charge of providing Yahoo search services on computers by controlling the technology sustaining search algorithms for both companies across the gargantuan website universe. Yahoo on the other hand, was left with the task of handling revenues from search ads for both companies. In recent times, however, Yahoo has scraped off elements responsible for generating 37% of its ad revenue owing to dwindling traffic. Moreover, the profit-sharing scheme also obliged Microsoft to pay Yahoo 88% of search revenue generated from its site during the initial five years of the agreement.
Current Yahoo CEO Marissa Mayer commented on the partnership that was left to be negotiated between her and current Microsoft Executive Satya Nadella: “Over the past few months, Satya and I have worked closely together to establish a revised search agreement that allows us to enhance our user experience and innovate more in our search business.” As the halfway point of the agreement arrived, the friction between said search partners reached a tipping point as Microsoft shares slipped by 17 cents in morning trading and Yahoo added 4 cents to its share capital of $45.7. “This renewed agreement opens up significant opportunities in our partnership that I’m very excited to explore,” she also stated.
The amended pact permits Yahoo greater control over how search results are presented on mobile and desktop platforms under the condition Yahoo continues using Bing to process the majority of search traffic arriving on the website. Furthermore, Yahoo will resume normal service in handling its own Gemini ads whereas Microsoft will take exclusive control of selling ads delivered by Bing, the search engine website unveiled by Microsoft in late-March 2009.
Our global partnership with Yahoo has benefited our shared customers over the past five years and I look forward to building on what we’ve already accomplished together,” said current Microsoft CEO Satya Nadella. “Our partnership with Yahoo is one example of the diverse partnerships we ’ll continue to cultivate in order to have the greatest impact for our customers.”
Former Google search executive Ms Mayer was vocal of her dissatisfaction with the amended terms and has been busy bulking Yahoo search technology and ad revenue in areas Microsoft has no jurisdiction in . Her personal analysis argued the revenue per search for Yahoo has been worse under the Microsoft pact than when it handled web searches and advertisement schedules on its own. However, before the companies went into an agreement, their aggregate searches totaled 28%. Interestingly, their combined market share has notably increased to 32.6% for desktop searches in the US since February.
Microsoft and Yahoo plan to begin the transition of reallocating advertiser sales this summer. The process will be carried out by integrating sales lineup with the engineering team to “allow both companies to service advertisers more efficiently."
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