Yahoo Is Not Pleased With Its Microsoft Search Deal

That big Yahoo Microsoft search deal is not working as well as Yahoo would like. Do you think Yahoo will sever its ties with Microsoft prematurely? Do you think it should? Share your thoughts in the c...
Yahoo Is Not Pleased With Its Microsoft Search Deal
Written by Chris Crum
  • That big Yahoo Microsoft search deal is not working as well as Yahoo would like.

    Do you think Yahoo will sever its ties with Microsoft prematurely? Do you think it should? Share your thoughts in the comments.

    CEO Marissa Mayer made comments at the Goldman Sachs Technology and Internet Conference in San Francisco on Tuesday expressing disappointment with the deal. Reuters quotes her:

    “One of the points of the alliance is that we collectively want to grow share rather than just trading share with each other…”

    “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.”

    Rumors have existed for quite some time, that Yahoo and Microsoft could kill their search deal early, but we’ve heard nothing substantial enough to suggest this is going to happen. However, Yahoo seems to be getting increasingly impatient.

    Yahoo is a different company than it was when it made the deal with Microsoft. Marissa Mayer is the fifth person to hold the CEO position while the deal has been in place (granted, two of them were interim CEOs). It was announced under Carol Bartz, and has gone through leadership from Tim Morse, Scott Thompson, Ross Levinsohn, and finally Mayer.

    Mayer is, of course, a former Googler, and has brought other former Googlers along for the ride. Since Mayer has been at Yahoo, the company seems to be closer with Google than any other time in recent memory. In fact, last week, Yahoo announced a new partnership with Google (non-exclusive) for contextual ads, which will see Yahoo displaying contextual display ads from Google on various Yahoo properties and “certain co-branded sites” using Google’s AdSense for Content and AdMob advertising offerings.

    “By adding Google to our list of world-class contextual ads partners, we’ll be able to expand our network, which means we can serve users with ads that are even more meaningful,” said Yahoo in its announcement. “For our users, there won’t be a noticeable difference in how or where ads appear. More options simply mean greater flexibility. We look forward to working with all of our contextual ads partners to ensure we’re delivering the right ad to the right user at the right time.”

    We asked Microsoft’s Stefan Weitz about Google and Yahoo’s partnership last week, when we spoke with him about Microsoft’s new “Scroogled” campaign. The only comment he offered on the subject, was “I’d say I wonder how Google is using the content [of] your private communications in Gmail to serve ads in other places.”

    Google Executive Chairman Eric Schmidt recently expressed interest in partnering with Yahoo, years after the two companies tried to partner on a similar search deal to what Yahoo has with Microsoft. The partnership never happened thanks to the threat of regulation, so Yahoo settled for Bing, which regulators did not have a problem with.

    Since all of that, Google has cleared some significant regulatory hurdles (though it faces others). Last month, the company settled with the Federal Trade Commission, which found that Google’s search practices did not violate antitrust law.

    A couple weeks ago, Yahoo released its earnings report for Q4 and the full year 2012. The report was better than many analysts had expected, and this was helped significantly by better-than-expected search performance. Mayer made some comments during the company’s earnings call, indicating that search is a major priority at Yahoo. Wired quoted her:

    “Overall in search, it’s a key area of investment for us,” Mayer said. “We need to invest in a lot of interface improvements. All of the innovations in search are going to happen at the user interface level moving forward and we need to invest in those features both on the desktop and on mobile and I think both ultimately will be key plays for us.”

    “We have a big investment we want to make and a big push on search. We have lost some share in recent years and we’d like to regain some of that share and we have some ideas as to how.”

    It was interesting to see this emphasis put on search, but still on the front end, which would seem to imply that Yahoo is happy to continue outsourcing the back end. It makes you wonder what Mayer’s thinking, particularly if she’s not happy with the Microsoft/Yahoo deal performance.

    Last week, reports emerged that Russian search engine Yandex has surpassed Bing in global search queries, though as Danny Sullivan at Search Engine Land notes, Bing is still well head of Yandex in unique searchers.

    Recent research from RKG has indicated that the Yahoo Bing Network continues to take away market share from Google, as Bing recently pointed out to us, noting that Bing Ads have gained paid search spend share from Google four quarters in a row.

    Obviously it’s not benefiting Yahoo to the extent the company would like.

    Microsoft did tell us about some new ad formats that it will be launching this year, such as Google-like product listing ads and click-to-call ads with Skype integration. Both formats have proven popular with Google advertisers, and the Yahoo Bing Network continues to strive to emulate Google’s success.

    David Pann, GM of Microsoft’s Search Network tells us that advertisers come over to the Yahoo Bing Network with the mentality of “It performs well over there [Google], so it will here too.”

    Will Yahoo and Microsoft’s Search Alliance stay in place? How long will Yahoo remain patient?

    This is not the first time we’ve seen Yahoo speak publicly about dissatisfaction with Microsoft in recent memory. Regarding IE 10’s “Do Not Track” default, Yahoo recently slammed Microsoft saying that the company’s move “degrades the experience for the majority of users and makes it hard to deliver our value proposition to them.”

    That was not an off the cuff remark. That was an official blog post.

    At the conference, Mayer also reportedly made comments expressing an interest in strengthening Yahoo’s relationship with Facebook (a big partner of Bing’s). Bloomberg reports that Mayer said she plans to focus on mobile apps and strengthening ties with Facebook to “bolster turnaround efforts at the biggest U.S. web portal.” Brian Womack and Peter Burrows quote her:

    “A lot of the strengths of Facebook are available to Yahoo users,” Mayer said yesterday at an investor conference in San Francisco hosted by Goldman Sachs Group Inc. “That’s something we want to build upon. We have a real commitment to bringing valuable content to our users.”

    Enhancing social features is crucial to Yahoo’s success, Mayer said, as she reinforced her preference to partner with companies like Google, Apple Inc. and Facebook rather than build expensive new products.

    Facebook CEO Mark Zuckerberg said he would “love” to work with Google at a recent company press event, though he indicated that those two companies aren’t really on speaking terms. He did, however, also say, ““We want to work with any company as long as they’ll honor the privacy of the folks on Facebook.” (as quoted by The Verge).

    On Wednesday, Yahoo announced that it has expanded its display advertising partnership with Microsoft and AOL into Canada.

    Do you think a Yahoo search partnership with Google would be good for users? For advertisers? Could the deal that the companies backed out of a few years ago work in the future? Is Yahoo better off sticking with Microsoft? We’d love to hear what you think about it.

    Image: Google Talks Archive (YouTube)

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