Yahoo Search Partnership With Microsoft Renewed With Modifications

After a lengthy negotiation period, Microsoft and Yahoo have now announced a renewed search alliance, which features significant amendments to the earlier partnership.

The new deal provides Yahoo with more flexibility in terms of how the company is able to monetize its search traffic. In the previous arrangement, Yahoo had to carry Microsoft’s Bing ads on desktop, while Yahoo had the flexibility to sell as it liked on mobile. Yahoo made significant use of the latter aspect of this agreement over the past year, by launching its Yahoo Gemini platform that provides a single place for marketers to buy mobile search and native ads.

Under the new deal, Yahoo has increased flexibility on desktop. Now, only 51 percent of its desktop search traffic has to carry Bing ads, while the remainder can carry ads from its own Gemini system or from other partners.

Google expressed interest in being Yahoo’s partner in 2008 before a deal with Microsoft was put into place, but this was derailed at that time over competition concerns. Certainly, there is the potential Google will now become an external partner. Search Engine Land explains Yahoo said it is looking to most likely extend Gemini to handle desktop search ads, and while it didn’t rule out the possibility of partnering with Google, Yahoo is choosing not to speculate on it at this time.

Another major change in the new alliance is that Microsoft will now become the exclusive sales force for ads delivered by its Bing Ads platform, while Yahoo will do the same for its Gemini ads platform. Previously, Yahoo handled the sales for Bing search ads as well as its own. Most likely, this change will mean that Yahoo will cut its sales force, and Microsoft will have to increase its sales team. Both companies will also integrate the sales teams with the engineering teams as part of the deal, which Yahoo says will “allow both companies to service advertisers more effectively.” Yahoo explained in its statement that these transitions to advertiser sales responsibilities will occur this summer.

“We firmly believe that search is still in its infancy – and this partnership marks the next chapter in our exploration of how to make search truly great,” said Yahoo CEO Marissa Mayer. “I want to thank Satya Nadella and his team for working closely with us over the past few months to rejuvenate our partnership. Search has, and will continue to be, an incredibly important part of Yahoo, and this new partnership represents a major step forward in our renaissance.”

Interestingly, this new deal is coming right after comScore estimated that Bing took 20.1 percent of U.S. search traffic in March, which is the highest share that Bing has achieved since its launch in June 2009. Yahoo, powered by Bing, had 12.7 percent, while Google still had the large majority of the market share at 64.4 percent.

Based on these numbers, Yahoo’s market share may be less important to Microsoft now than it was in the past. Last year, Microsoft estimated that its Bing business would be profitable on a standalone basis by the 2016 financial year. Although the new change in terms with Yahoo could potentially set this back to some degree, it’s certainly true that Bing is now an established name in search, while it wasn’t before.

It would appear that, at least on the surface, Yahoo is coming out ahead with this revised deal, by gaining the ability to start selling its own ads into its own search results. However, as more details are likely to come out over the next little while, we’ll be watching to see how this modified arrangement plays out in the future.