On Tuesday, Yahoo announced that it had reached a search advertising deal with Google – a deal that hopes to give a much needed boost to CEO Marissa Mayer’s attempts to “fix” the company that continues to lose money.
Yahoo also reported that profit and revenue was below market estimates.
The deal with Google builds upon Yahoo’s existing search collaboration/partnership with Microsoft. Under that arrangement, Yahoo receives a percentage of revenue generated by Microsoft-provided ads displayed on Yahoo’s sites. Under the new deal with Google, Google will also supply some search advertisements and will pay Yahoo an undisclosed percentage of revenue generated from the ads.
The deal that Yahoo has with Microsoft (to use the Bing search engine) was exclusive until it was renegotiated in March. The renegotiation left Yahoo with the ability to work with other “search-ad providers.” Mayer seized on that opening when she reached out to Google.
The deal with Google went into effect October 1 but was only just revealed. The agreement expires at the end of 2018.
The two companies also agreed to certain terms required by the United States Department of Justice – but those provisions have not yet been made public. In 2008, the Department of Justice forced Google and Yahoo to cancel an attempt at a similar agreement over certain antitrust concerns.
In addition to the natural expiration of the contract at the end of 2018, Google can also terminate the deal if “certain events” take place, but neither company has disclosed those deal breakers. Like the deal with Microsoft, the Google deal is non-exclusive, meaning that Yahoo can use other search technology to provide the site with search ads.
Facing tough competition from Facebook and Google, Yahoo has been struggling to generate revenue from ad sales. The announcement of the deal reached with Google was one of the few pieces of good news for investors.
Mayer, in her fourth year as CEO, said Yahoo’s current financial forecast was “not indicative of the performance we want. We are also experiencing continued revenue headwinds in our core (advertising) business, especially in the legacy portions.”
The seemingly only other good news came from Yahoo’s fledgling business known as Mavens – mobile, video, native and social advertising. Revenue generated from that business rose 43% in the third quarter.
As of the end of Tuesday, Yahoo’s shares had lost 35% this year.
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