Yahoo-Bing Renegotiate Search Deal, Yahoo Gains Right To Serve Search Ads On The PC

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This morning Yahoo and Microsoft announced an amended search relationship. While it keeps the basic framework of the original deal in place it gives both companies, most notably Yahoo, more autonomy.

Yesterday comScore reported that Bing search market share had reached 20 percent in the US, while Yahoo was at 12.7 percent.

There’s lots of “win-win” language in the Yahoo-Microsoft press release. However Yahoo CEO Marissa Mayer had been unhappy with the deal she inherited and exploited areas where the contract was silent (e.g., mobile) to build a new search business and ads platform at the company (i.e., Gemini).

Here’s what the release says about the deal modifications:

Yahoo will now have increased flexibility 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 . . .

[T]he update increases agility and sales focus. 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.

Accordingly, Yahoo will now be able to sell its own ads across platforms, on both PC and mobile. Yahoo will continue to serve mostly Bing ads on the PC (it’s not clear if there are any “quotas” in place). The parties will also handle all their own ad sales.

The announcement was silent about ad position or priority. It’s a safe bet that Gemini will expand to cover the PC as well. Will Yahoo favor its own ads on the PC? In other words, will there be designated Yahoo and Bing ad slots in Yahoo PC search results? How will Yahoo integrate and prioritize Bing Ads vs. Yahoo search ads on the PC?

Previously Yahoo was handling so-called “premium search” sales for both companies. That will end. Premium search ad sales were sales to larger advertisers and brands. By comparison, smaller advertisers bought directly from Bing. SEM firms using Microsoft APIs also bought directly from Bing.

Yahoo explained in the release that revenue sharing and the “existing underlying economic structure [of the prior deal] remains unchanged.” Presumably that means that the major financial terms are not affected.

On the surface this has to be seen as a win primarily for Yahoo. The company gives up some ad sales control, but it gains the ability to start selling its own ads into its own search results.

I’m sure many more details will come out in the following weeks that will give us a clearer sense of how the mechanics of this modified arrangement will play out. But I would imagine that Marissa Mayer is pleased with an outcome that gives Yahoo more control and freedom.

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