By Angela Chen
Yahoo Inc. and Microsoft Corp. have updated their search
partnership to allow more flexibility in how the results are
presented and how the advertising teams are managed.
The news comes after months of negotiation over a deal that has
caused friction between the two tech giants. Shares of Microsoft
slipped 19 cents in morning trading to $42.07, while Yahoo shares
added 4 cents to $45.77.
The new terms update the 10-year agreement struck in 2009 by the
predecessors to the companies's current chief executives,
Microsoft's Satya Nadella and Yahoo's Marissa Mayer. The agreement
allowed for terms to be re-evaluated at the five-year point.
Under the original agreement, Microsoft provided Yahoo with
search services on computers, controlling the technology
underpinning searches across both companies' sprawling universe of
websites. Yahoo, in turn, handled sales of search ads for both
companies. But in recent years, Yahoo has chafed at elements of the
partnership, which generates 37% of its revenue.
Now, Yahoo will have more control over how search results are
presented on both desktops and mobile devices, though it will
continue using Bing for a majority of its desktop search traffic.
Microsoft will take over the job of selling ads for Bing, while
Yahoo will continue handling its own Gemini ads.
The companies will then integrate the sales teams with the
engineering teams to "allow both companies to service advertisers
more efficiently, " the companies said. That transition will occur
this summer.
The original revenue-sharing pact had Microsoft paying Yahoo 88%
of the search revenue generated from its sites during the first
five years of the agreement, the companies then said.
Ms. Mayer, a former Google Inc. search executive, had made it
clear she was unhappy with the terms. Yahoo's revenue per search
has been worse under the Microsoft deal than when it operated its
own Web-search technology and advertising system. Ms. Mayer has
worked to bulk up Yahoo's Web-search technology and ad sales in
areas that don't infringe on the agreement with Microsoft, such as
searches done on mobile devices.
Neither Yahoo or Microsoft alone can hope to attract the number
of searches executed by Google. Before Yahoo and Microsoft teamed
up in search, the two companies together handled about 28% of Web
searches in the U.S. In February, their combined market share
amounted to 32.6% of U.S. desktop searches, according to comScore
Inc.
The 2009 contract allowed for the partners to re-examine the
deal at its halfway point, which passed in February. In late March,
the companies mutually agreed to extend the deadline to April
24.
Representatives for both companies weren't immediately available
for further comment.
Write to Angela Chen at angela.chen@dowjones.com
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