Microsoft-Yahoo Search Ad Deal Will Continue for Another Year

The Search Alliance lives on. Yahoo and Microsoft have extended their revenue-per-search guarantee for one year, an extension of a partnership that Yahoo CEO Marissa Mayer had hinted wouldn’t continue when the current one expired March 31.

At the Goldman Sachs Technology and Internet Conference in February, Mayer said “Our biggest business problem right now is [page] impressions,” Mayer said. “Basically can we grow impressions, can we get growth happening here?”

She also felt monetization needed to be better on the Yahoo properties.

“We need to see monetization working better because we know that it can and we’ve seen other competitors in the space illustrate how well it can work.”

Despite her earlier comments, Yahoo and Microsoft did agree to extend the current search partnership.

The new contract extension is for one year, and began on April 1 according to Tuesday’s 10Q filing with the Securities and Exchange Commission. The search partnership guarantees Yahoo 18 months of revenue per search for ads that appear on the wide network of Yahoo sites.

This agreement makes perfect sense for Microsoft, despite the guaranteed revenue from the “revenue per search” which potentially would cost Microsoft more than it would earn from the agreement.

However, Microsoft wants the market share that Yahoo provides and they don’t want to potentially lose the deal to another search provider – namely Google. Google currently owns more than 67 percent of the search market, with Bing at just under 17 percent and Yahoo at less than 12 percent.

It is surprising that Yahoo signed on for this extension, as Mayer wasn’t happy with this search deal. She felt that Yahoo and Bing shared the same search market share, rather than cutting into Google’s market share.

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