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April 17, 2015

Microsoft, Yahoo tweak terms of renewed search partnership

Yahoo to plunge deeper into search while Microsoft to take gradual control over sales of all ads.

By CBR Staff Writer

Microsoft and Yahoo have worked out a revised deal in which Yahoo will get more control over how the search results are presented, while Microsoft will take control of the advertising.

Both companies announced that the revised partnership is aimed at improving the search experience, creating value for advertisers and establishing ongoing stability for partners.

The partnership inked by both CEOs’ predecessors in 2009 involved Microsoft providing exclusive paid and algorithmic search services on PC to Yahoo, and a revenue sharing agreement where Microsoft pays Yahoo a percentage of Bing Ads revenue delivered from Yahoo searches.

The renewed deal has not altered the existing underlying economic structure.

The update provides increased flexibility to Yahoo to enhance the search experience on any platform, since the partnership is non-exclusive for both desktop and mobile. Yahoo will continue to serve Bing ads and search results for a majority of its desktop search traffic.

The renewed deal has also enhanced agility and sales focus in a sense that Microsoft will become the exclusive salesforce for ads delivered by Microsoft’s Bing Ads platform, while Yahoo will continue to be the exclusive salesforce for Yahoo’s Gemini ads platform.

Both companies will also integrate their sales and engineering teams to offer enhanced service to advertisers by this summer.

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Satya Nadella, CEO, Microsoft Corp said: "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.

"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."

The new deal had been in the works for months.

"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," said Yahoo CEO Marissa Mayer.

"This renewed agreement opens up significant opportunities in our partnership that I’m very excited to explore."

The two giants joined hands in 2009 when Microsoft decided against buying Yahoo for $45bn after a series of rebuffs from Yahoo.

Sources say that Mayer was increasingly becoming discontent with the partnership and wanted more control over the search business.

The new deal is seen as more favorable for Yahoo, as Microsoft’s Bing would no longer be the exclusive provider of Yahoo search results on the desktop.

Yahoo is now free to deploy its own search technology that had been in the works for years now or invent new tools that have the potential of anticipating users’ needs in new ways.

Yahoo is also free to partner with Google, though any such deal could land it in trouble with regulators. The two planned to partner for advertising way back in 2008 but it was shot down by the regulators over competition concerns.

Though Microsoft has lost exclusivity in the new deal, it is not exactly a complete loss for the technology giant.

As cited in ars technica, comScore recently revealed search share results under which Microsoft’s Bing took 20.1% of US search traffic in March, its highest since it was launched in 2009, followed by Yahoo at 12.7%. Google, however, still commands the lion’s share at 64.4%.

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