Microsoft Extends Revenue Guarantee To Yahoo In ‘Search Alliance’By: Chris Crum - May 7, 2013
In a recent financial filing, Yahoo cited that Microsoft extended its revenue guarantee in the two companies’ ongoing “search alliance”. This is a guarantee that Microsoft has so far failed to live up to, but continues to extend, presumably, to keep Yahoo from walking away from the deal, and potentially into the arms of a certain competitor.
The U.S. revenue-per-search guarantee, which had expired on March 31, will be extended for one year, and took effect on April 1, Yahoo said in its 10Q filing with the Securities and Exchange Commission on Tuesday.
Extension of the search revenue guarantee marks Yahoo’s first agreement with Microsoft since Marissa Mayer became Chief Executive of Yahoo in July. Mayer, who is seeking to reverse a multi-year decline in Yahoo’s revenue and in its online traffic, has been critical of the Microsoft partnership struck by former Yahoo CEO Carol Bartz.
Indeed she has. At the Goldman Sachs Technology and Internet Conference in February, she expressed her disappointment, saying that they 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.”
There have been rumors in the past that Yahoo would kill its deal with Microsoft prematurely, but Microsoft has indicated that it would not make it easy for Yahoo to pull out. Of course, there has also been plenty of speculation that Yahoo could try a deal with Google again. Yahoo initially tried to partner with Google, but potential regulatory hurdles led to that falling through and Yahoo settling for Microsoft.
But that was a long time ago, and under different leadership.
The Microsoft Yahoo Search Alliance could still fall apart.
“On March 31, because of the failure with RPS, Yahoo potentially could have terminated its deal with Microsoft on February 23, 2015,” explains Search Engine Land’s Danny Sullivan. “That’s the five year mark into the ten year agreement, where there’s an out for both sides.”
“That’s still a date to watch, but April 1, 2014 is more important,” he adds. “If Microsoft fails to deliver for a third time, maybe by then, Yahoo will want to move on. Assuming, of course, that US regulatory bodies even allow it to partner with Google.”
Google has cleared some significant regulatory hurdles since it tried to partner with Yahoo before. It would be interesting to see how such a scenario would develop in the future.
In semi-related news, Chitika announced a multi-year extension of its advertising agreement with Yahoo.
“Yahoo! has a proven track record of capitalizing on strong, successful partnerships, helping the organization meet and exceed its business goals,” said Venkat Kolluri, Chitika’s CEO. “Extending and expanding our relationship with Yahoo! reaffirms our commitment to deliver innovative online and mobile ad technology solutions, which will help contribute to the growth of Yahoo!’s search marketplace.”