What People Are Missing About The Yahoo Search Deal


What People Are Missing About The Yahoo Search Deal


Some so called Yahoo 'experts' were quick to praise CEO Marissa Mayer for the new search deal agreed this morning with Microsoft.

But this deal changes little for Yahoo's dying search business. Specifically, it doesn't address the lack of quality advertisers on Yahoo's search network these days. Years ago advertisers made sure they were on both Yahoo and Google. Now many top advertisers don't bother with Yahoo and opt to advertise only on Google.

As ads are priced based on an auction system losing key advertisers depresses the overall market and results in low revenues per click to Yahoo. This allows low quality advertisers, like Ask.com, to fill the void and create a bad user experience for Yahoo's users. When someone searches for "Student Credit Card" they want the actual card - not another page of links like those offered by Ask.com and others. The net effect is users having a poor experience on Yahoo and leaving in droves.

The new deal does not address the underlying causes for advertisers fleeing Yahoo. It's great Yahoo can now sell its own ads again but convincing advertisers to come back to a small platform that poorly targets ads to users (thanks to the use of Microsoft's poor matching technology) is a challenge Yahoo is not likely to overcome.

Here's more details of today's announcement:

Yahoo today announced an extension to their 2010 search deal with Microsoft. The announcement also included two key changes to the deal.

(1.) Yahoo will now be able to use non-Bing ads for up to 49% of the ads it serves search customers

(2.) Microsoft will now sell all the Bing ads under the deal. Yahoo will transfer all client relationships involved with these ads to Microsoft and instead focus its sales and relationships on its Gemini ad platform.

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