Mayer Wins Concessions in Rejiggered Microsoft-Yahoo Deal

Microsoft and Yahoo on Thursday announced they were altering a search partnership that has been in place since 2009.

Under the amended agreement, Yahoo no longer will exclusively serve Bing ads and search results for its desktop traffic. That means Yahoo can sell some of that desktop traffic to another party.

“Yahoo has an opportunity for greater revenue from the deal,” said Jim McGregor, principal analyst at Tirias Research.

“If it can sell those ads, they have the potential for capturing that revenue,” he told the E-Commerce Times.

The amended agreement also turns over management of advertising delivered by Bing to a Microsoft salesforce. Bing ads delivered to mobile searches will continue to be handled by Yahoo’s Gemini platform.

“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 Microsoft CEO 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,” noted Yahoo CEO Marissa Mayer. “This renewed agreement opens up significant opportunities in our partnership that I’m very excited to explore.”

Win for Yahoo

The new partnership agreement may not be as evenly distributed in the benefits department as the CEOs suggest it is, however.

“It’s really a win for Yahoo,” said Greg Sterling, vice president of strategy and insight for the Local Search Association.

“It gives Yahoo more freedom and flexibility to serve its own ads off PC search results, which gives it more reach for its Gemini platform,” he told the E-Commerce Times.

In the past, Mayer has criticized the Microsoft search deal, which was cut before she became CEO of Yahoo, for failing to make any progress in cutting into Google’s share of the search market.

“By giving her some concessions,” Sterling said, “Microsoft may get a more willing partner.”

In addition, market share of Microsoft’s search engine Bing has grown since it inked the agreement.

“Because of that, Nadella may feel Microsoft can make some concessions to Yahoo and they won’t hurt it,” Sterling suggested, “but that’s just speculation.”

Stealth Growth

Microsoft has managed to make some headway in the search market by baking Bing into third-party services. Most recently, the Firefox browser announced it was making Yahoo, which uses Bing, the default search engine.

That resulted in 1.2 point jump in share for Yahoo at the end of last year, although some of those gains slipped during the first two months of this year, as users started dumping Firefox at the urging of market leader Google.

“Bing is growing its reach through partnerships,” said Dan Cryan, senior director for media and content at IHS Technology.

“Microsoft has been pursuing that strategy for quite some time,” he told the E-Commerce Times.

The drawback to that strategy, though, is the same one suffered by white box PC makers.

“Having Bing as an engine for these partners is a great thing,” said Tirias’ McGregor, “but it’s hidden, and you don’t get the brand recognition.”

Consumer Benefits

Although the amended deal is designed to benefit the companies involved, consumers could benefit from it, too.

“With Marissa Meyer, Yahoo has focused on search in ways that it wasn’t focused before,” Sterling pointed out.

“This deal gives them additional incentives to try and boost consumer usage,” he continued, “because the more consumer usage and market share they have, the more money they can make for themselves from this deal.”

“There are incentives for Yahoo to invest in search now in ways that there may not have been previously,” he added.

As for the original goal for the Microsoft-Yahoo alliance, not much progress has been made there.

“The idea was that the two of them together could mount a more serious challenge to Google,” said Charles King, principal analyst at Pund-IT.

“From what I’ve seen, they have grown their advertising revenues a bit,” he told the E-Commerce Times, “but they haven’t been anything like a major contender in that space.”

John Mello is a freelance technology writer and contributor to Chief Security Officer magazine. You can connect with him on Google+.

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