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Tuesday, May 14, 2013

Yahoo! Ready to Pull The Plug on Microsoft Partnership

Posted by @ 10:41 am

There is a story in the Wall Street Journal (WSJ) that suggests that Yahoo has been secretly trying to find an out for the deal they made with Microsoft.

Apparently there are a lot of very precise reasons why the company wants to pull the plug on the deal that is nearly 4 years old. One of the biggest reasons is that Microsoft has not been successful in helping Yahoo reach the previously agreed upon revenue per search results.

However, it’s not going to be easy for Yahoo to simply walk away from the 10 year deal.

Why Can’t Yahoo Just Leave?
Under the terms of the deal Microsoft’s Bing powers Yahoo search, while Yahoo uses its solid relationship with advertisers to be the salesforce for both companies.

When the deal was formed Yahoo gave up their online search technology. So, Yahoo physically cannot quickly break the deal and move on with search as easily as it would like. It would cost the company more than the deal is costing them now. Yahoo would have to find another search partner that could power the bulk of their search results as quickly as possible. Google is the only option left that Yahoo has to consider. Unfortunately, going to Google may not be possible without having regulatory approval.

Making a deal with Google would lead to a financial hole that Yahoo might not be able to climb back out of. This is because Yahoo would also lose the vast majority of its search advertisement serving technology until the approval process is complete. This is because Microsoft also took over that aspect of Yahoo when the deal was made. Yahoo may be able to go without their listings for a little while, but they would have a long and difficult time having to recreate all of their search advertisements. They would almost definitely be taking a financial loss as well.

The deal terms between Microsoft and Yahoo mean that the partnership can only be called off if either Microsoft closes or sells Bing, or if Yahoo’s revenue per search falls below 40% of Google’s. To put this into persperctive, Yahoo’s search revenue grew 6 percent year-over-year in Q1 of this year and there are no rumors of Bing going anywhere anytime soon.

However, according to a Bloomberg report, Yahoo is undeterred by these stumbling blocks. While Yahoo CEO Marissa Mayer has been unsuccessful in her attempts to get out of the agreement for almost a year, she has already met with her previous employer Google and agreed to enter an alternative search partnership if the Microsoft agreement can be concluded.

Could we see a “Goohoo” or “Yahogle” sooner rather than later?

Courtney Mills Courtney is an online marketing and communications specialist at ineedhits - a leading search engine marketing firm with over 16 years experience. Courtney has been living and breathing online marketing for over 5 years. She specializes in web and communication marketing, while providing news and opinion to online marketing communities.

View Courtney Mills's profile

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