Yahoo reaches search deal with Google after loosening Microsoft ties

Yahoo CEO Marissa Mayer was previously a Google exec. (GeekWire File Photo)

Updated below with Microsoft statement.

Yahoo just announced a search deal with Google, taking advantage an earlier revision of its longtime Microsoft search pact that gave Yahoo the ability to use alternative services to power its Internet search and advertising services.

The deal between Google and Yahoo was disclosed a short time ago in a regulatory filing by Yahoo. Under the arrangement, Google will provide web search results, search ads and image search services for an unspecified number of Yahoo user queries, on both desktop and mobile platforms.

According to the regulatory filing, the non-exclusive deal allows Yahoo to continue working with Microsoft, as well.

Here’s an excerpt from the filing describing Yahoo’s agreement with Google.

On October 19, 2015, Yahoo! Inc., a Delaware corporation (“Yahoo”), and Google Inc., a Delaware corporation (“Google”), entered into a Google Services Agreement (the “Services Agreement”). The Services Agreement is effective as of October 1, 2015 and expires on December 31, 2018. Pursuant to the Services Agreement, Google will provide Yahoo with search advertisements through Google’s AdSense for Search service (“AFS”), web algorithmic search services through Google’s Websearch Service, and image search services. The results provided by Google for these services will be available to Yahoo for display on both desktop and mobile platforms. Yahoo may use Google’s services on Yahoo’s owned and operated properties (“Yahoo Properties”) and on certain syndication partner properties (“Affiliate Sites”) in the United States (U.S.), Canada, Hong Kong, Taiwan, Singapore, Thailand, Vietnam, Philippines, Indonesia, Malaysia, India, Middle East, Africa, Mexico, Argentina, Brazil, Colombia, Chile, Venezuela, Peru, Australia and New Zealand.

Under the Services Agreement, Yahoo has discretion to select which search queries to send to Google and is not obligated to send any minimum number of search queries. The Services Agreement is non-exclusive and expressly permits Yahoo to use any other search advertising services, including its own service, the services of Microsoft Corporation or other third parties.

The regulatory filing notes that Yahoo and Google “have agreed to certain procedures with the Antitrust Division of the United States Department of Justice” to review the agreement, “including delaying the implementation of the Services Agreement in the U.S. in order to provide the DOJ with a reasonable period of review.” Antitrust problems nixed an earlier ad deal reached by Google and Yahoo in 2008.

Yahoo, which just reported quarterly earnings that fell short of analyst expectations, says in a news release that the deal provides Yahoo “with additional flexibility to choose among suppliers of search results and ads. Google’s offerings complement the search services provided by Microsoft, which remains a strong partner, as well as Yahoo’s own search technologies and ad products.”

Yahoo’s deal with Microsoft, which was reached by then-CEOs Carol Bartz and Steve Ballmer more than six years ago, was revised by Yahoo CEO Marissa Mayer and Microsoft CEO Satya Nadella earlier this year. The revision ended the exclusive arrangement between Yahoo and Microsoft on the desktop, allowing Yahoo to explore partnering with others, as well. Mayer was a Google executive before joining Yahoo as CEO.

Google continues to dominate the U.S. search market, with nearly 64 percent of queries as of last month, compared to 20.7 percent for Microsoft and 12.6 percent for Yahoo, according to the latest ComScore data. Yahoo’s share has slipped significantly since striking the original deal with Microsoft.

Update, 3 p.m.: Microsoft offered this statement in response to our inquiry: “We remain committed to the Yahoo syndication partnership and will continue to serve the majority of Yahoo traffic as outlined in our contract extension. Yahoo is a valued partner and we look forward to continuing to serve our advertising customers through the Bing Ads marketplace.”

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Yahoo Appoints Laurie Mann as CIO, Replacing Mike Kail

Yahoo! Inc. said it’s promoting Laurie Mann to chief information officer, replacing Mike Kail, who is stepping down after less than a year on the job.

Replacing Mann is Enrique Munoz Torres, who has been promoted to senior vice president of product and engineering, overseeing search, the company said in an e-mailed statement Tuesday. Torres was a key player in developing the company’s Gemini platform, which combines search advertising with “native” promotions that are designed to blend more seamlessly with digital content.

Kail chose to leave, Yahoo said, without giving further comment. The executive has faced legal challenges since joining the Web portal. In November, his former employer, Netflix Inc., sued him for fraud, claiming he took cash kickbacks from two suppliers and had deals to receive stock, money or gift cards from other vendors. Kail didn’t immediately respond to a request for comment.

Chief Executive Officer Marissa Mayer is trying to drive a turnaround at the company, which has struggled to add users to woo advertisers. Kail’s departure is the latest in a series of management shakeups. Kevin Gentzel, is leaving the company after less than a year, Yahoo said in a message earlier this month. Last month, the company said Senior Vice President Mike Kerns is planning to leave as Yahoo focuses more attention on emerging businesses.

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Yahoo reportedly prepping a new app to compete with Google Now

Yahoo may be behind in the search game, but it could be looking to compete with the likes of Google and Microsoft when it comes to creating a personalized search tool. On an earnings call yesterday, CEO (and former Google executive) Marissa Mayer said that Yahoo was "particularly interested in search in the mobile sector, what happens when you involve context," and it's apparently focusing attention on "what happens when you involve personal information, from things like email." Today, Business Insider reports that a source has provided more details about the project, which is supposedly known as Index.

Index is supposed to be a smartphone app, following up on Yahoo's current Aviate launcher for Android. Aviate acts as a personal assistant using smartphone data and calendar entries, but this would act more like Google Now, mining information from users' inboxes. According to the source, Yahoo is attempting to have a pilot version ready sometime in the second quarter of this year.

On the call, Mayer referred to things like Siri, Cortana, and Google Now as a new and promising kind of search. She said that as mobile moves to "the watch and onto television screens and video," Yahoo wants to help people "make better sense of the content they already have access to, content in their mail," to provide better results. She gave the example of learning that a user had booked a flight from John F. Kennedy Airport, then prioritizing their search to favor practical data and a boarding pass over, say, Wikipedia. Helping users find flight information is a fairly fundamental task for a mobile assistant like Google Now, Siri, or Cortana. According to Business Insider's source, though, Yahoo thinks its advantage lies in sheer longevity:

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Yahoo's new search pact with Microsoft includes opt-out clause

Either company will be able to terminate the amended deal on or after October 1, according to a new regulatory filing.

Yahoo's recently renewed search pact with Microsoft includes a termination clause that allows either company to walk away from their years-long partnership.

The clause, part of an amended search partnership announced last week between the two companies, allows either company to terminate the arrangement at any time after October 1 by delivering written notice to the other company, according to a filing Monday with the US Securities and Exchange Commission. Under the terms of the previous agreement, a 10-year deal signed in 2010, Yahoo could terminate the deal only if certain revenue metrics were not met.

Microsoft and Yahoo announced the amended deal Friday, saying that it gave Yahoo more "flexibility to enhance the search experience" across mobile and desktop devices. In addition, the companies modified their handling of ad sales, with Microsoft now exclusively handling the Bing ads on Yahoo Search and Yahoo continuing to sell ads through its own Gemini ads platform.

The update to the search deal came 6 years into a 10-year pact between the companies. In 2009, the companies' then-CEOs -- Microsoft's Steve Ballmer and Yahoo's Carol Bartz -- signed a deal that would see Micorosoft's Bing platform power Yahoo search. In return, Yahoo would be the exclusive sales force for ads and would receive a significant sum each year to be the brains behind Yahoo search.

Representatives for Yahoo and Microsoft did not immediately respond to a request for comment. A source familiar with the negotiations told CNET that both companies were in favor of the clause, which is seen as encouraging an ongoing dialog and reducing anxiety.

The amended deal comes as the chief executives of both companies attempt to transform the profiles of their respective companies. Yahoo CEO Marissa Mayer has shifted her company's focus to mobile devices and how to generate revenue off those products. Mobile is also a priority for Microsoft CEO Satya Nadella, who is pushing services and mobile with a greater emphasis on cloud services.

However, the relationship hasn't yielded the revenue-per-search guaranteed by the partnership, prompting Microsoft to twice extend the RPS guarantee for another year. Yahoo CEO Marissa Mayer expressed her dissatisfaction with the partnership in 2013, saying that the arrangement hadn't delivered the increased revenue or market share that was expected.

"One of the points of the alliance is that we collectively want to grow share rather than just trading share with each other," Mayer told attendees at the 2013 Goldman Sachs Technology and Internet Conference in February. "I'm not confused. Our biggest business problem right now is impressions."

The amended search deal also modifies the terms of the deal's revenue sharing arrangement. Under the new deal, Yahoo will keep 93 percent of the revenue generated by ads served on its pages. That's up from the 88 percent of revenue Yahoo received for the first five years of the partnership and a 90 percent bump Yahoo received in February.

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Renegotiating Search Deal, Yahoo And Microsoft Extend Deadline

Negotiations likely to yield new terms for Search Alliance.

According to a Reuters report, Yahoo and Microsoft have extended a negotiating deadline as they try to determine the form their search partnership may take over the next five years. The original deal was crafted during a different time by different CEOs.
Even though the original agreement was for a period of ten years, apparently after five years the contract allows for a renegotiation or exit. This original contract was signed by the companies in 2010. According to Reuters, which reviewed a Securities and Exchange Commission filing, the deadline has been extended from February 23 to roughly the end of April.
The Search Alliance, as the Yahoo-Microsoft relationship is called, has underperformed expectations — especially for Yahoo. The two companies’ combined share of the US search market has remained basically flat for the past five years, hovering between 29 and 31 percent. However Bing has grown its share, mostly at Yahoo’s expense.
Current Yahoo CEO Marissa Mayer, who inherited the Search-Alliance deal from former CEO Carol Bartz, has been openly critical of it. She has tried with some success to reinvigorate search and paid-search advertising at Yahoo outside of the Search Alliance framework. Most recently Yahoo captured the US “default” search slot from Google on the Firefox browser and saw a bump in marketshare, some of which has now been given back.
Despite Mayer’s criticism of the Search Alliance, I would be surprised if the company completely abandoned of the deal. Doing so would probably require many millions of dollars of additional investments to recreate what existed before Yahoo turned search over to Microsoft. Yahoo’s institutional investors would also probably balk at the move.
For its part, Microsoft is somewhat less dependent on Yahoo traffic today than it was in 2010 when Bing was in third place. Both parties may thus have incentives to alter the terms of the deal.
It’s not clear what the deadline extension says about the state of negotiations. However I suspect we will see some different terms emerge and changes in the relationship.

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Yahoo Asking Firefox Users To Make Yahoo Search Their Default Search Engine

After Yahoo lost some Firefox users to Google, Yahoo begins notifying these users to switch back to Yahoo Search as their default search provider in Firefox.

Yahoo and Mozilla just announced a “strategic five-year partnership that makes Yahoo the default search experience for Firefox in the United States on mobile and desktop.” The companies said they will explore other potential “future product integrations and distribution opportunities to other markets.”

Yahoo is thus going to displace Google the current Firefox search provider. Firefox was at one time the main alternative to Microsoft’s IE browser but has been supplanted for many by Google’s Chrome, now the world’s top browser. In mobile Firefox has struggled to find an entry point.

Firefox has a roughly 16 percent browser market share on the desktop in the US market according to StatCounter. Google and Firefox have had a less congenial relationship since the former launched competitive browser Chrome. The last Google-Firefox search deal was in 2011.

While the Yahoo deal makes sense for both parties, there may be some monetary risk for Firefox in leaving Google. That will have to be seen. However Yahoo CEO Marissa Mayer characterizes search as a growth area for the company in her blog post about the partnership:

At Yahoo, we believe deeply in search – it’s an area of investment and opportunity for us. It’s also a key growth area for us – we’ve now seen 11 consecutive quarters of growth in our search revenue on an ex-TAC basis. This partnership helps to expand our reach in search and gives us an opportunity to work even more closely with Mozilla to find ways to innovate in search, communications, and digital content. I’m also excited about the long-term framework we developed with Mozilla for future product integrations and expansion into international markets.

The new Yahoo search experience on Firefox will debut next month. Mayer says it will offer “a clean, modern and immersive design that reflects input from the Mozilla team.” From the screens being shown in Mayer’s post it looks a lot like Google.

This new clean look could also be a prelude to a new and improved Yahoo search UI more generally.

To engage in some speculation, implied in the press release, Yahoo could eventually become the search provider for Firefox OS mobile devices around the world. Those devices are just starting to come into the market and their future is a bit uncertain given Android’s aggressive efforts targeting the low end of the smartphone market.

The press release says this partnership is the most significant for Yahoo in the last five years. Though Firefox’s share is relatively small compared to Chrome and IE, the deal will still drive millions of queries to Yahoo each month and should help boost search-related ad revenue.

See Marketing Land’s companion interview with Marissa Mayer.

Postscript: It’s still not clear whether Yahoo is taking over from Google in Europe as the default search provider for Firefox. According to the Mozilla blog post, in Russia Yandex is now the default search engine and in China it’s Baidu. Google continues to be an option on Firefox in both markets. In Europe the company is silent. Our assumption is that Google remains the default provider. Ironically losing that position would probably help Google (somewhat) in its antitrust negotiations in Europe.

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